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Demand Pressure on Berlin's Housing Market Fuels Continued Rental Growth

Despite the “rent freeze” rent control regulation that has been in effect since 2015, rent rates in Berlin averaged a year-on-year growth by more than twelve percent in 2016. The average net rent rose to 10.15 euros per square metre during the survey period. It is the first time that average rents on new leases in the German capital crossed the mark of ten euros. As recently as 2015, rents averaged 9.05 euros. This is the gist of the latest housing market survey compiled by real estate service provider Jones Lang LaSalle (JLL). Since 2004, the company has analysed the housing markets of Germany's eight largest cities, these being (in that order) Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart and Leipzig.

Fastest Rent Hike since 2012

As JLL reported, the strain on the rental markets of the surveyed cities continued to intensify in 2016, resulting in another banner year in terms of rent growth. In fact, the growth in some cities actually outpaced the record year of 2012. According to JLL, the main reason for this is the high rate of incoming migration in popular metropolises like Berlin and Munich. The inflow itself generates demand, which in turn ensures continued rental growth because the supply in available flats is far too low. Going forward, JLL therefore assumes that rates in Berlin will keep catching up with the residential rent levels of other German cities.

69 Percent Rent Growth since 2004

With an overall increase by 69 percent, Berlin counts among the cities with the fastest rent growth since 2004, the year in which JLL started to watch the market. The slowest rate of growth was recorded in Cologne in the years 2004 through 2016 at 26 percent overall (8.70 to 11.00 euros). Particularly striking about the situation in Berlin is that rents in other German cities are considerably higher, but lack the brisk momentum of rent growth on Berlin's housing market. Rents in Hamburg, for instance, have risen to 11.50 percent since 2004, but the growth adds up to 40 percent only. Rents in Munich have gone up to 17.55 euros, an increase by 57 percent. Still, it falls short of the 69-percent growth recorded in Berlin.