Berlin has recently transformed into the city with the world’s most pricey property market. As the city is being overrun by speculative purchasing and costly high-rise construction, it poses a threat to the affordable rental property lifestyle that the city has been known for in the past.
It was reported by property consultancy Knight Frank that Berlin property prices sky-rocketed by 20.55 during 2017. At the same time, other top cities across Germany leaped up the ranks of the most expensive cities, overtaking places like China.
Other German and Dutch Cities Rise In Poll, While London And Auckland Fall
Along with Berlin, Frankfurt, Munich and Hamburg were all placed in Top 10 list of the world’s biggest property price increases. With a number of notable Dutch cities lagging not too far behind them. As it has only experienced a 2% increase, London was placed 101st, with Auckland dropping to 99th place after only experiencing a 2.2% increase. This is interesting, because the New Zealand city once was experiencing a surge of interest and purchasing of property.
Vancouver, where authorities have tried to apply the brakes on the rising prices its experienced, still experienced a hump up to 4th place with a property price increase of 16%.
Why No-One Is Surprised About The Increase In Prices
It is not entirely surprising that Berlin’s housing price increases have taken it to the top of this poll however as the city has been experiencing soaring prices for some time now. In fact, over the last 14 years, Berlin has had an average increase in its property prices of at least 120%.
Berlin’s commercial and residential property markets have experienced an influx of foreign buyers entering it. Among them, most notably is Warren Buffet the US investor who has invested in one of the city’s high end real estate firms.
What Caused It
What has caused this property price boom? It is largely due to the growing population of the city and the cheap borrowing that has been in place. Over the last five years, Berlin’s population has ballooned to 3.5 million, with 50,000 being added every year. By 2035, it is been predicted that the population could rise to 4 million.
As a result of this surge in property prices, there is a risk that a bubble could burst. The Bundesbank, the biggest central bank in Germany, warned in February of this year that in many cities throughout the country, property was overpriced by at least 15% and that in Berlin it could be overpriced by 35%.
Why Foreign Buyers Still Want To Invest In Berlin
However, from the point of view of overseas buyers from New York and London, Berlin is relatively cheap even with annual 10% rises. Interestingly, well-placed Berlin apartments sell for only a 3rd of the price the same property of its kind would sell for in London.
There has also been a boom in commercial property sales. The Sony complex, a fitting emblem to the reconstruction of the city after the Wall fell, was recently bought by Ontario’s municipal employees using their pension fund for 1.1 billion euros. While the state pension fund of Norway was used to buy the media group Axel Springer’s headquarters in Mitte for around 400 billion euros.
