Rising Rental Prices in Berlin Amid Declining Construction Permits

Berlin is witnessing a significant surge in rental prices, with new apartments now commanding an average of EUR12.66 per square meter from July 2023 to June 2024. This represents a staggering 15.6% increase compared to the previous year, as reported by the Berlin-Brandenburg Association of Housing Companies (BBU). The BBU oversees about 45% of the rental housing stock in Berlin, and last year, its members brought 2,500 new apartments to the rental market.

The situation is not limited to Berlin alone; the surrounding areas are also experiencing rising costs. New construction rentals in the Berlin outskirts have climbed to EUR13.31 per square meter, reflecting an increase of 11.2% from the previous year. In the broader Brandenburg region, new rental prices have reached nearly Berlin levels at EUR12.02 per square meter, representing a 29.2% jump from EUR9.30 a year prior.

Despite these sharp price increases, Maren Kern, a leading figure at BBU, points out that these figures are based on projects initiated years ago, prior to the major spikes in construction costs. She notes that current developments would require rental rates between EUR18 to EUR20 per square meter to break even, which is beyond the reach of many potential renters.

The decline in construction activity is alarming, with the number of building permits in Berlin dipping below 10,000 for the first time since 2012. In 2024, only 9,921 housing units were approved, marking a 37.6% decrease from 15,902 permits issued in 2023. In Brandenburg, the number of building permits has also fallen, declining by 18.8% to 9,142.

Kern suggests that to reverse this trend, significant regulatory reforms are necessary, along with a reduction in building standards that, while high, do not necessarily enhance living conditions. She advocates for public funding to stabilize the housing market, emphasizing the importance of reliable financial support over extended periods to ensure predictability in planning.

In addition to new builds, existing rental prices are also on the rise. The BBU has reported a 7% increase in the rental prices of existing apartments, now averaging EUR8.59 per square meter in Berlin. The highest rents can be found in the districts of Friedrichshain-Kreuzberg (EUR10.09), followed by Steglitz-Zehlendorf (EUR9.65) and Mitte (EUR9.30). Conversely, the lowest rents are in Marzahn-Hellersdorf (EUR7.60) and Lichtenberg (EUR7.99).

The increases in rental prices for existing apartments are more pronounced in the outskirts, where they have risen by 6.8% to an average of EUR7.80 per square meter. In the rest of Brandenburg, the prices have increased by 5.9% to EUR6.77 per square meter. Kern highlights that maintenance costs have surged more than rental prices over recent years, with construction costs increasing by up to 37.2% since 2021, while existing rents have only risen by 6.9% during the same period.

Looking forward, it is anticipated that existing rental prices will continue to increase by an average of 2.5% to 3.5% annually. This ongoing trend reflects a broader challenge within the housing market, as the gap between rising costs and rental affordability continues to widen.