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EXPLAINED: How Berlin rents and property prices soared in 2022

High rents and housing shortages are nothing new in Germany's capital - but a recent report shows the trend is accelerating, with average asking rents going up by almost a euro per square metre last year.

Rental properties in Berlin Prenzlauer Berg
Rental properties in Berlin's Prenzlauer Berg district. Photo: picture alliance/dpa/dpa-Zentralbild | Jens Kalaene

Anyone who’s scoured the recent listings on WG Gesucht or ImmobilienScout24 will be able to see the prices on Berlin’s rental market are higher than they’ve ever been.

It’s not unusual to see 50 square metre flats advertised for a good €1,500 per month these days – and that’s without utilities – making the city’s former rent cap feel like a distant memory. 

The latest housing report from the Investitionsbank Berlin (IBB) translates this anecdotal evidence into facts: in 2022 alone, rents in the capital rose by around 10 percent or just under one euro to €11.54 euros per square metre.

READ ALSO: EXPLAINED: In which German cities are rent prices rising the fastest?

If that seems a little on the cheaper end, it’s because it’s an average taken from all districts of Berlin, from Buch or Marzahn way out in the east to Kreuzberg and Prenzlauer Berg, two of the city’s more central districts.

For apartments in the city centre, asking rents shot up to around €16 per metre on average, while flats outside the Berlin S-Bahn ring came in at €9.71 per square metre. Berlin’s price level is also spreading to areas just outside the city: here, IBB registered average asking rents of €11.12 last year.

One of the reasons for the steep jump in rental costs is the high level demand for living space. After dropping a little during the pandemic, Berlin’s population grew again by 13,384 people in 2022, with far more people arriving from other German states or from abroad than Berliners leaving the capital. And this doesn’t look set to go down, either: the Senate Department for Urban Development, Building and Housing expects Berlin’s population to increase by 5 percent to 3,962,875 people by 2040.

Far too few affordable homes

As part of its study, IBB tracked the availability of homes in three different price brackets: the low price segment (under €7 per square metre), the middle price segment (€7-10) and high (€11 or above). In the most expensive category, housing supply was generally keeping up with demand – with the exception of a few districts such as Reinickendorf and Treptow-Köpenick.

However, when it came to properties in the middle category, all districts had less – or in the cases of districts like Neukölln and Kreuzberg-Friedrichshain, a lot less – housing than needed. In the bottom price segment, all districts had a drastic need for new homes. 

Flats in Berlin's city centre.

Flats in Berlin’s city centre. Photo: picture alliance/dpa/dpa-Zentralbild | Britta Pedersen

This is partly driven by low levels of construction in previous years: in 2021, the number of completed building projects declined for the second year in a row, although construction intensity remained at a high level. In the second year of the pandemic, just 15,870 new homes were completed – 467 fewer than in the previous year.

Potential reasons for this decline include the sharp rise in construction and financing costs, which has made a lot of projects far less financially viable. In addition, high interest rates have been making it trickier for companies to finance their projects in the first place. 

However, with a construction backlog of around 65,000 flats and a realisation rate of approximately 87 percent, IBB expects that a large proportion of these flats will be ready for occupancy in the coming years.

READ ALSO: Germany sees record high rent increases in 2023

Purchase prices continue to rise unabated

With the steep rises in rents, people have increasingly been looking to purchase properties in the German capital, which has also led to price rises in owner-occupied homes.

According to IBB, the asking prices for flats in Berlin have more than doubled since 2012. On average, flats were offered for €5,817 per square metre, with new-build flats significantly higher at €8,409 per square metre. In 2021, Berliners had to spend an average of €698,000 to fulfil their dream of owning their own home. Most of these property purchases were flats, with detached and semi-detached houses only making up a small proportion of the properties sold in Berlin. 

Blocks of flats in Berlin

Blocks of flats in the German capital of Berlin. Photo: picture alliance/dpa | Florian Schuh

“The affordability of housing continues to be one of the most pressing problems for Berlin households,” said IBB chairman Dr. Hinrich Holm. “The discrepancy between increasing demand and the lack of construction activity has recently led to a historic increase in asking rents. Currently, the need for housing is estimated at at least 47,000 flats.”

This was largely to do with insufficient planning and construction, Holm said. “Both rent-controlled and privately financed housing construction and the activation of private developers will continue to be important for this. IBB will continue to support and promote these projects within the framework of our funding programmes in order to provide the broadest possible access to affordable housing.”

READ ALSO: Why does Germany keep missing its house-building targets?

From Berlin to Brandenburg? 

The search for housing within Berlin is becoming increasingly challenging due to housing shortages and rising rents, which is increasingly driving Berliners – and especially young families – out to the countryside.

The destinations for migration are Berlin’s surrounding areas, but increasingly also the second-tier cities and the wider communities of Brandenburg.

These migratory movements are also increasing the volume of commuters living in Brandenburg, which has an impact on the volume of traffic and the housing market situation in the Brandenburg municipalities. The median asking rents have risen in all regions, although Berlin’s inner city is by far the priciest place to live. Somewhat strangely, the asking rents in the surrounding areas just outside Berlin have exceeded those in the outer districts of Berlin since 2019.

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Why it’s hard to find an apartment with air conditioning in Germany

When temperatures start to get up to 30C or more in Germany, a familiar debate begins. It often starts with a simple question, asked by a new arrival to the country: “Why don’t German homes have air conditioning?”

Why it's hard to find an apartment with air conditioning in Germany

The tendency to avoid air conditioning (A/C) is not uniquely a German trend. Europeans tend to use A/C less than residents in the US, and some countries in Asia.

But as temperatures have crept slowly upwards due to climate change, and the number of hot days has increased, Europe has seen an increase in demand for air conditioning. Across the continent A/C use has more than doubled since 1990.

But A/C is used much more commonly in countries that see higher temperatures like Spain, Italy or France, whereas it is still uncommon in homes in Germany.

So why does Germany tend to lack air conditioning, and why aren’t more Germans interested in installing it?

It’s not a ‘hot’ country

Ask a German why air conditioning is so rare in the country, and you’ll probably hear some version of “Well Germany is not such a hot country.” Which may be true generally, but is a less than convincing explanation if you hear it on a sunny summer day when it’s 35C outside.

But it is worth keeping in mind that while Germany does have warm summers, often with at least a couple heat waves, super hot days are few compared to warmer countries, like those in southern Europe. 

Given Germany’s weather can really only be described as hot for a few weeks out of each year, and considering the costs of installing and running air conditioning, most Germans figure it’s not worth it.

attic with sliding window

A sliding attic window is designed to help tenants cool off, but it won’t help to open windows during the hottest part of the day. Photo: pa/obs LiDEKO | LiDEKO

This isn’t only reserved for homes, but extends to plenty of public spaces including office and government buildings, and to some public transportation as well. 

In fact, schools and workplaces do occasionally call it quits during hot weather spells in an event called hitzefrei.

READ ALSO: Ditching AC for ‘Hitzefrei’ – Taking on the German summer as a Californian

Air conditioning is energy intensive and expensive

The other side of the argument against air conditioning is that both installation and operating costs can be expensive. Air conditioning tends to be energy inefficient, so using it can significantly increase your utility bill.

From an environmental point of view, all the energy used for air conditioning, if Germany was to start installing A/C at scale, would add to the country’s energy demand and greenhouse gas emissions – both of which Germany is already struggling to cut down year after year as part of its climate goals.

It is an ironic feature of traditional air conditioning that it creates a negative feedback loop: More people rely on air conditioning to stay cool as weather warms, but weather continues warming in part due to emissions from air conditioning.

That said there are cases where access to air conditioning can save lives. In particular elderly people and those with health-risks are prone to heat sensitivity. So while it’s probably good that not every house in Germany has A/C, it’s important that hospitals and some other buildings in a given city do.

READ ALSO: How German cities are adapting to rising temperatures

‘Cold air makes you sick’

Along with the reasonable (if debatable) reasons for the lack of A/C in Germany, there are also cultural factors.

On the social media website Reddit, a user posted the question, “Will more places in Germany start using air conditioning?”

One of the top comments read, “Don’t you know cold air makes you sick….says Oma (the German word for grandma). 

While that comment comes off a bit tongue in cheek, it touches on a real and deeply-ingrained belief that persists among parts of the German population: That exposure to cold, or even maybe a cool breeze, is bad for your health. This includes a draft in your house, called a Durchzug in German.

For this reason, the German Red Cross felt compelled to debunk the Durchzug health myth in a hot weather warning they issued in 2019.

a heat pump is installed

An employee inspects a heat pump in front of a newly built residential building. Heat pumps are also effective for cooling. Photo: picture alliance/dpa | Bernd Weißbrod

What can you do about the heat?

Regardless of where you stand on the air conditioning debate, if you don’t have a personal A/C unit at home presently, the best way to endure the hottest days of summer may be to take a few tips from the locals.

During my first summer in Germany, I took to leaving the windows open throughout the day, thinking that the occasional warm breeze was the best relief I could hope for at home. But one day my landlord came by and asked me why I was suffering in the heat with the windows open.

He recommended that I instead leave the windows open at night or in the early morning to get some fresh cool air inside, and then keep all the windows closed through the heat of the day. I tried this strategy the next day, and immediately felt that he was right.

Compared to homes in the US, for instance, German homes tend to be very well insulated. This can be equally important in the summer as it means that the interior tends to stay cooler than the outside (as long as you keep it mostly sealed off).

On extremely hot days, you might even keep your shutters down to shade the windows and prevent the sun from shining through.

Of course the effectiveness of the strategy depends on having a home that’s well insulated, including double paned windows and well-sealed doors etc. If you feel that the inside of your house is getting as warm or warmer than the outside, then it’s probably time to open up the windows or go outside and sit in the shade.

Fans are also useful. Best is a ceiling fan designed to rotate counter-clockwise to push air downward, which can maximise wind chill within a home, but floor fans can also help.

Ironically, in the longer term it may actually be heat pumps that help Germany to modernise its cooling infrastructure. 

Heat pumps maximise the efficiency of heating systems by moving warm air around a building, and they can also work with cooling systems. Many heat pump systems on the market today are already built to support both heating and cooling functions, and they are much more energy efficient than classic air condition systems.

READ ALSO: Who can apply for Germany’s new heat pump grants for homes?

Unfortunately for tenants with no heat pump and no A/C, the best you can do for now is take notes of cool places in your city where you can relax in the shade or in the water during the hottest hours or the hottest days.

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