Is now the right time to buy an apartment in Berlin?

Although real estate prices have been rising for years, the demand for condominiums in Berlin remains high. If you are looking for a property to buy, this is usually a long time. And even if one is found, the question arises: is it worth buying in the capital right now or will prices fall soon? In any case, not only are real estate prices high at the moment, but financing is also becoming more and more expensive with rising interest rates on loans.

According to vdp Research, the research institute of the Association of German Pfandbrief Banks, prices for owner-occupied living space in Berlin rose by around twelve percent in the first quarter of 2022. Stagnating or falling prices will only occur when demand falls.

Although there are initial indications of this, Michael Neumann, CEO of the construction financing broker Dr. Small. In view of the current interest rate level, some buyers are no longer willing to accept the high real estate prices – or simply can no longer afford them. According to FMH-Finanzberatung, the current interest rate for a 10-year loan is 2.93 percent on average. A year ago it was 0.89 percent.

Expert: “It may be a long time before real estate prices fall on a larger scale”

At the same time, however, there is also the development that other buyers want to secure good interest rates right now, with loan interest rates likely to continue to rise, and thus keep demand high. “It may be a long time before real estate prices fall to a greater extent,” says Neumann. This applies in particular to those interested in real estate in Berlin: “In central locations in popular metropolises, interested parties will initially wait in vain for stagnating or even falling prices. Certain groups of buyers still have sufficient capital for this.”

This is also confirmed by data from the Immobilienscout portal: While the demand for high-priced condominiums has actually already fallen in several major German cities, this has not been observed in Berlin. Here, demand from January to April rose by twelve percent compared to the previous year.

“Nobody knows when prices will really drop,” says Michael Beumer from Stiftung Warentest. Beumer advises that anyone looking for a property to live in should not make their decision for or against a purchase dependent on price developments, which no one can predict with certainty at this time. “Anyone who now has the chance to buy an apartment in Berlin, in which they can imagine living for 20 years or more, and in which solid financing is possible, shouldn’t wait, just in the hope that it will be in half a year cheaper,” says the real estate expert. Because even if real estate prices actually fall sooner or later, that says nothing about lending rates. If these continue to rise and thus make financing more expensive, hardly anything would be gained in terms of price.

Real estate as an investment pays off later and later

“It’s different when someone is looking for a property to invest in,” says Beumer from Stiftung Warentest. At current prices, it takes longer and longer for the purchase price to be amortized through rental income. While this used to be the case after 20 years, it now takes 40 years, for example in Berlin, for property owners to recover the purchase price through rental income. Anyone who now buys a property as an investment could therefore make a bad deal. Especially when prices actually drop sooner or later. The property is then worth less for resale.

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