Burly Berlin and its perky property market

July 4, 2018

Now this is in the sense of a big, strong, muscular city, not one that is picking a fight. One that is forging ahead in more sense than one

Berlin Housing Supply Limited

Contextually, Germany has a population of 83 million, which has increased by nearly 3 million since 2009. This coupled with high job growth, creates more pressures on the housing market.

Berlin Industry_CocaColaIn Berlin, the housing pressures are possibly the greatest. Berlin has a population of 3.6m – the biggest city in Germany when compared with the other big six: Frankfurt, Hamburg, Munich, Dusseldorf, Koln, Stuttgart.

There is a disparity between approved property developments and completions, with 1.9 permits issued for every completed development. The build rate is 6k annually, but 48,000 new people move to Berlin annually (CBRE)

In parallel, the city’s population has risen by about 150,000 and the number of households by 75,000. Forecasters work on the basis that the population will increase by more than 250,000 by 2030. 100,000 houses needed to be built in 2015, but only 15,000 got built. It is not without good reason that Berlin is quoted as one of the top three most attractive real estate markets for existing investments, new investments and development (PWC).

There is also a strong supply of old buildings which need to be modernised and brought into the housing stock pool. About 1% of the German Real Estate market falls into the ‘Listed’ building category, which equates to around 1.1m buildings. Housing Associations don’t want to own old housing stock so they sell on older units in their possession and substitute these by purchasing newer homes.

Berlin has pent-up property demand

Home ownership in Berlin is low at about 16% compared with 46% for the whole of Germany. And rents have been on the rise, up 7% in 2016 year-on-year. So there are strong incentives driving home ownership.

It is home to 3 top Universities: Humboldt Universität zu Berlin, Freie Universität Berlin, as well as Technische Universität. What’s more, Berlin is the most affordable city in the top ten of the 2012 QS Best Student Cities, as it combines cheap rent and low living expenses with no, to low, tuition fees for public universities.

Both Berlin’s GDP and rise in disposable income are higher than the national average. Digital trading and service industries are growing, while the city still has a strong electrical engineering and chemical industry. It is also a hub for research and development, having 11 state universities and various scientific institutes all nearby.

It is also the Start-Up Capital of Europe with one starting every 20 minutes. Why is that?
Well according to the Davos World Economic Forum it has a low cost of establishing a start-up, its international make-up with a young, talented demographic and friendly eco-system also helps. 22,800 jobs were created in the tech industry between 2008-2015. Berlin’s share of the digital economy has grown from 4.8% to 18%.

It is for all of these reason and more that home prices have been rising +9.6% since 2015 (CBRE)

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