Berlin property prices continue to rise
Once again, Berlin has come out on top. The past several years have seen Berlin’s property prices skyrocket, and the latest quarterly findings position the German capital as the world’s most lucrative property market.
Globally, however, the growth of prime residential prices has been decelerating. In the first quarter of 2019, Knight Frank’s Prime Global Cities Index found that growth rates have dropped down to 1.3%--the lowest rate of annual growth since the final quarter of 2009, right in the midst of the financial crisis. Although still rising, the global rate of wealth creation slowed in 2018 due to a number of factors. The threat of an economic trade war, uncertainty surrounding Brexit, and the rising cost of finance (the U.S. alone has seen nine rate rises since December 2015) have contributed to the trend towards moderation in the first quarter of 2019. The IMF (International Monetary Fund) has projected that 70% of the world’s economies will see a slowdown in growth this year. The stagnation in prime sales, and hence prices, is an expected result.
That being said, the downtrend hasn’t taken effect everywhere: seven European cities occupy the top ten rankings in the index, which tracks the movement in luxury residential prices across 45 cities globally. Berlin takes the number one spot, with an annual growth rate of over 14% and a 3.6% quarterly growth. Other European cities in the top ten ranking include Frankfurt, Edinburgh, Paris, Zurich, Madrid, and Geneva. According to Knight Frank, these cities share three crucial aspects: strong tenant demand, limited new supply, and relative affordability.
Berlin’s high performance in this index should come as no surprise to residents of the booming capital. The increases in housing prices are caused by a significant shortage of available housing, as well as a quickly growing population. Between 2011 and 2017, Berlin’s population increased by nearly 290,000 and the number of households by almost 200,000. This growth is not in small part due to Berlin’s favourable labour market development in recent years. Berlin’s transformation into an innovation hub has led to significant employment growth in cutting-edge industries--an excellent basis for the residential market. While Berlin found it difficult to adapt to the market economy after Germany’s reunification, lagging behind the rest of Western Germany for decades, the city is now beginning to overtake western German metropolitan areas. Berlin is well on its way to becoming one of the most expensive German and European cities, as well as the most innovative.
Source: Knight Frank Research. *Provisional.