CURRENT PRICE AND INTEREST RATE TRENDS IN BERLIN AND FORECASTS FOR 2023

The inflation rate has reached record highs this year – a reason for the European Central Bank (ECB) to raise the key interest rate. In addition to rising prices for energy and building materials, prospective property buyers are now also feeling the effects of current developments when it comes to construction financing. Are you wondering how this has changed the real estate market in Germany and Berlin? We explain and provide a forecast for 2023.

The end of low interest rates

Prices for residential units have doubled in the last ten years. However, current crises are changing the market considerably. At 10.4 % in October, the inflation rate was the highest since 1951. Meanwhile, the key interest rate is at 2 %. Low interest rates for property financing are therefore a thing of the past – since the start of 2022, construction interest rates have quadrupled. Top interest rates for property loans now fluctuate between 3.67% and 4.23%, the highest level since 2011.

Development of real estate prices in Berlin

Rising interest rates as well as material and energy prices mean that fewer and fewer people can afford a property. In theory, lower demand means falling prices. Nevertheless, the cost of apartments and houses in Berlin continued to rise until the third quarter of 2022 – albeit not as sharply as in previous years. At the beginning of 2022, the average price per square meter for a house was still around €4,880, while buyers paid €5,095 in the third quarter. At the present time, there has been a decline to around €5,060.

Forecasts for the real estate market

Forecasts are difficult to make in these uncertain times, as market developments depend on political, economic and demographic factors. Nevertheless, experts share the opinion that the key interest rate will be raised for the last time to 2.25% at the beginning of 2023. It is estimated that mortgage rates will rise by up to 1.5% in 2023. Good news for developers: from March 2023, the state will provide new subsidies for new construction projects.

Berlin is and will remain a city with strong economic growth. Demand for housing remains high and existing buildings and rental properties in particular are becoming more attractive. Nevertheless, sellers must be prepared for real estate prices to stagnate in the future and not increase to the same extent as in recent years.

Do you have any questions on this topic? Feel free to contact us! We will provide you with comprehensive advice on your real estate purchase or sale.