Housing Shortage Drives up Rents in Berlin’s Gravy Belt
The consequences of keen demand for housing in Berlin are increasingly felt in the districts surrounding the city. This is the upshot of a recent analysis conducted by the Immowelt real estate portal.1 Its findings show that rent rates in the greater metro area of the German capital increased by 17 percent during the first six months of the year – much faster than the average in the eastern German Länder. To compare the development of new-tenancy rents anywhere between Dresden in the south and Rostock in the north, the online estate agency examined listings for flats between 40 and 120 square metres in 76 cities and counties in the eastern states.
Berlin’s Rent Cap Distorting the Picture
Die analysis revealed a distinct metropolitan effect in the case of Berlin: Rents in the greater metro area of Berlin as commonly defined, which is home to a population of about 4.7 million, continued to climb during the first six months of 2020. The development is undoubtedly driven by the city itself, where rents—on a higher level than in the gravy belt, of course—went up another four percent even during the coronavirus pandemic.
A closer look2 at each of the city’s boroughs, however, returned a differentiated picture as early as June: On the one hand, the so-called “rent cap” that became effective in February 2020 triggered a negative catch-up effect to roll back major rent hikes of recent years in 19 out of 23 districts. But on the other hand, the measure coincided with a 17-percent surge in new-tenancy rents for new-build units completed in 2014 or later, which are exempt from the statutory cap. On the bottom line, this adds up to an average rent growth of four percent citywide. It shows once again that the concerns among experts are borne out by reality, and that political intervention upsets the balancing play of supply and demand – resulting in corresponding distortions.
Price Rally in the Suburbs
The sense of uncertainty that the situation creates among landlords and tenants, and that will linger until the Federal Constitutional Court has ruled in the matter, is having increasingly visible ramifications for Berlin’s metro region. The Immowelt experts found evidence for genuine price rallies in some places, such as the district of Dahme-Spreewald, where asking rents rose to an average of eleven euros per square metre during the first half-year of 2020. This translates into a price hike of 17 percent, the steepest increase anywhere in the eastern German states during this period.
The one exception in the list of districts and cities with rapid rental growth is Potsdam, the state capital of Brandenburg: In response to recent rent increases, prices here experienced a downward correction by about nine percent, as Immowelt found. The trend, however, is bound to be short-lived, as the experts concluded, because the construction of the European “giga factory” of electric car marker Tesla in Grünheide east of Berlin and the concomitant creation of 10,000 jobs will usher in the next surge in demand for Berlin’s metro region. In fact, rents in the actual district where the Tesla plant is being built have already pushed up three percent.