Housing markets under pressure: significant rise in asking rents

Rapid increase in rental prices continues

The trends observed in the Berlin housing market in the first half of 2023 also influenced developments in the second half of the year. Rents in Berlin’s rental housing market in particular have risen significantly compared to other cities. The fall in demand for condominium ownership due to higher financing costs has put enormous pressure on the rental housing market.

Asking rents rose by 21.4% year-on-year to €19.42/sqm p.m. in the second half of 2023. Looking at existing housing alone, the increase was actually 31.0%. There was also a significant increase in rents of 9.6% observed in the new-build segment. The current prime rent (90^th percentile) is now approaching Munich prices for the first time at €31.00/sqm p.m. In view of the continuing shortage of available housing and the decline in new-build activity, the increase in rents for new leases is hardly surprising.

There were further price corrections in the Berlin owner-occupier market in 2023, where a clear distinction must be made between price trends for existing and new-build homes. In contrast to rents, prices have been falling on the owner-occupier market. There were further price corrections in the second half of 2023 and a continuous decline in asking prices across all segments. The purchase price across the overall owner-occupier market was around €5,700/sqm, a fall of -3.6% year-on-year. There were similar price falls observed in the market for existing homes (-3.4%) and in the premium segment (-3.4%). Only in the new-build segment was the decline in purchase prices less pronounced at -0.6% compared to the previous year.

The amendment to the building control regulations passed by the Berlin House of Representatives in December 2023 is intended to make it easier to add further storeys and loft conversions and build in wood. This should make it much easier to create space in existing buildings to counteract the existing housing shortage. In addition, the Faster Construction Act (Schneller-Bauen-Gesetz) is intended to create further incentives for the construction of new housing. This envisages shorter time frames, accelerated procedures, the use of building permits in accordance with Section 34 German Building Code (BauGB) and the examination of an assumed authorisation by an authority which does not make a decision by a given deadline. Priority will also be given to the densification of urban areas.

 

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https://www.jll.de/en/trends-and-insights/research/housing-market-overview