Berlin's Apartment Buildings: Inventors' Darlings

Berlin's apartment buildings are more popular than ever among domestic and foreign investors. This is the upshot of the latest IVD Rental Housing Market Report, based on data supplied by property valuation committees. According to the report, transactions involving apartment buildings with multi-dwelling units (MDU) totalled approximately 4.7 billion euros in 2013. This represents a 34 % share of all apartment building transactions in Germany‘s 50 largest cities. National transactions totalled 13.7 billion euros.

Given the Berlin has the lion's share of the market, it is unsurprising that the German capital takes the top spot as the country's highest turnover city, leaving its rivals trailing in the dust. Runner-up, and a long way behind, is Hamburg with transactions amounting to 1.2 billion euros during 2013, followed by Munich at 920 million euros. The Bavarian state capital was the sole city among the top three to see sales volumes decline year-on-year. As demand is still high, the dip can only be explained by the fact that the market has largely been swept clean. The fact that there are plenty of potential buyers in Munich was confirmed by the prices they were willing to pay: The average transaction price was 5.7 million euros. The average price tags in Hamburg and Berlin were 2.9 million euros and 2.6 million euros, respectively

According to the report, the comparatively low prices in Berlin are a major driver of the market's brisk growth. Unlike prices in Munich or Hamburg, Berlin's prices are still playing catch up and offer upside potentials. This is clear from transaction volumes and price developments: While transaction volumes for MDUs in Berlin during 2013 were 14.6% higher YOY, the number of transactions was only up by 8.3%. The relationship between transaction volumes and transactions was a nationwide trend.

The pool of data used to compile the study is from 2013 as it is based on property market reports from the various property valuation committees. More current assessments in the Rental Housing Market Report are provided by estate agents active in this segment. They indicate that extensive pent-up demand extends across all residential property categories in a majority of Germany's cities. While demand is most pronounced in prime locations, the dwindling supply is prompting an increasing number of investors to look for alternatives in good and average locations. According to the experts, the markets will be dominated by high demand for another three years at least. Accordingly, they expect to see rising prices in a number of cities, most notably in the best locations.