In the 4th quarter of 2022, prices in the Berlin real estate market were recorded to fall, caused by the decision of the European Central Bank to carry out a series of interest rate hikes.
This caused mortgage rates to double or even triple, bringing an end to a decade-long boom in German residential property prices. As a result, housing prices in Berlin began to fall for the first time in more than a decade of steady growth, starting a period of recession. This was largely caused by the fact that a significant part of the German population was not able to buy a house or apartment due to their high cost, and decided to stay in rental houses.
However, as per analysis of the 1st quarter of 2023, demand for residential real estate in Berlin has recovered. Housing prices had shown a 0.8 percent growth. Moreover, according to Immobilien Scout, despite the fact that prices for completed apartments in Berlin have been falling for the second quarter in a row, its drop (minus 0.3 percent) is significantly smaller compared to the previous quarter (minus 5.3 percent), which indicates a likely return to growth soon.
Other industry sources also indicate that the return of the German residential real estate market to an era of strong price growth has already taken place. The Europace housing price indicator, which tracks residential real estate in Germany, showed a return to growth in February compared to the previous month, breaking a series of seven consecutive falls that began in July last year.
It is also important to note that a major additional factor which holds the level of real estate prices in Berlin is an acute shortage of available housing on the market. According to some researchers, the German capital needs to build more than 100,000 apartments to meet the demand for housing.
