No Signs of Relief on Berlin’s Housing Market
With the supply shortage as extreme as it is, the housing market in the German capital remains severely strained. According to the “Housing Market Barometer 2018” published by IBB Investment Bank Berlin, the main obstacles hampering any meaningful relief to the situation in Berlin include the short supply in building land but also the resistance to construction projects.1 IBB asked 200 experts about their assessment of the market situation.
The experts’ assessment is backed by building statistics because housing construction in Berlin is simply not getting off the ground. It is expected that around 25,000 planning permissions will be issued in 2018, which implies a stagnant level when compared to 2017 and 2016.2 Although the total number of planning permits would, hypothetically speaking, suffice to complete the required 20,000 flats per year, the actual completions rate is barely more than half of that. Indeed, Berlin is a far cry from completing 20,000 flats annually.
“The Left-Green City Government Might Well Fail”
Volker Härtig, a local politician of the Social Democrat camp, is cited with a bleak outlook in this context by the Tagesspiegel daily. “The Left-Green city government might well fail in the area of housing construction,” he said in his capacity as chairman of the “Social City” committee of experts organised by the Social Democrats’ state executive committee. Härtig assumes that the strain on the city’s housing market will intensify in the coming years. One needs to remember that the Social Democrats are not just part of Berlin’s state government but are the senior coalition partner who got to nominate the Lord Mayor.
A recent analysis done by the Institute for Research in Economic and Fiscal Issues (IREF) confirms the forecast made by the Social Democrat politician Härtig. The institute found that real home prices in the German capital increased by 60 percent between 2013 and 2018. This puts Berlin in second place among metropolises with steep price hikes—and not just in Germany, but worldwide. Dublin is the only city with a yet faster home price growth.3
State Government Continues to Focus on Tenants
That the price trend is not about to change any time soon is illustrated by other statistics included in the IREF analysis. Out of the ten cities with the fastest price chances in the world, Berlin showed the poorest construction score. Only 4.22 flats for every 1,000 residents were completed in 2017—compared to 10.87 flats in Tokyo, the city topping the list. Runner up was Vancouver with a completions rate of 9.31 flats per 1,000 residents.
The urgency of stepping up housing construction in Germany’s first city is becoming ever more apparent, yet the city’s governing coalition of Social Democrats, the Left Party and the Greens seems to find no solution how to raise the completions total. This could well be a consequence of the city government’s resolve not to focus on the development of new residential accommodation despite the tremendous shortfall in supply but primarily on rent policy.4