Berlin Needs 13,000 Flats a Year

The official figure is finally on the table – calculated by the renowned BBSR Federal Institute for Research on Building, Urban Affairs and Spatial Development. According to the math done by the institute, the city would need 12,000 apartments in multi-unit buildings, along with 1,000 housing units in detached and semi-detached homes, every year between now and 2025 in order to cover demand. Berlin’s Senate has set a much more modest goal for itself: For the duration of the current parliamentary term, the number of apartments to be built each year is 6,000, that is, less than half of the demand identified by the BBSR survey.
Initially, I was worried the Senate might try to achieve this quota by granting subsidies. That is not the case, though. During a panel discussion hosted by “Berliner Immobilienrunde,” a representative of the Senate Administration stated that no subsidies of this sort were planned. The 6,000 apartments required, he added, will be raised without government grants. Similarly, Ephraim Gothe, undersecretary in the Urban Development Administration, said during a BFW conference: “Over the next few years, Berlin will not be able to afford construction subsidies on a major scale.”
This is good news for real estate owners. For let us not forget the years after Germany’s reunification, when generous grants led to the construction of up to 30,000 apartments in some years. It also led to rising vacancies and falling or stagnating rent levels. No property owner wishes to go back to those times.
Even without the subsidies, there is plenty of construction activity in Berlin. Project developers have rediscovered the city. Construction of 240 apartments is under way near Oberbaumbrücke in Friedrichshain, while 250 apartments are being built near the central railway station, 800 in the Spindlersfeld part of Köpenick, and no less than 1,200 in Karlshorst. “Capital” magazine, which quoted these figures, summed up by saying: “The faith in Berlin’s real estate market appears to be boundless at the moment.”
And yet construction falls short of demand. The BBSR figures suggest that the city’s population will increase by 20,000 before 2025 and the number of households – this being the key figure for housing demand – by 50,000. It is safe to infer from these stats that rent rates in Berlin will continue to climb. And in my opinion they will do so particularly in the bottom segment, which is continues to see virtually no construction activity because current rent levels still make it unprofitable to build new homes. Most construction projects belong in the high-priced segment. So, anyone wishing to invest in apartment blocks is well advised to target the low- and mid-price segments.