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Goodbye rent cap, hello property – What the Federal Constitutional Court’s decision and the pandemic mean for real estate prices

The judgement was handed down on April 15: The Federal Constitutional Court declared Berlin’s rent cap to be “incompatible with the Basic Law and therefore null and void.” The court’s ruling followed a lengthy period of political wrangling, heated debates and legal uncertainty that impacted both tenants and landlords. Now, at last, the Berlin real estate market has clarity.

But just how much of an impact will the federal court’s judgement have on rental prices for existing and new-build apartments? How will property prices in and around Berlin develop over the next few years? Is the market still being affected by the coronavirus pandemic? And what opportunities do the latest developments create for you as you look to invest and provide for your retirement? Read on and allow us to put the situation in perspective for you.

Asking rents in Berlin: declines, but not across the board

Berlin’s rent cap was not only unprecedented, it was also an experiment with far-reaching consequences. The rent cap froze rents for 1.5 million apartments at June 2019 levels. Moreover, since February 2020, the rents for new and renewed leases were not allowed to exceed certain specified ceilings. The same restrictions applied to in-place rents from November 2020. Apartments built after 2014 were excluded from the restrictions. The short-term result? Declining rents – but not everywhere and not for everyone.

In fact, a number of recent studies have confirmed the first measurable effects of the rent cap on the capital’s real estate market. According to the, long-standing price developments – temporarily (!) – went into reverse. In 2020, the average asking rent in Berlin stood at €10.14/sqm, an effective decline of €0.31/sqm – after years of constant price increases. However, last year’s price decline mainly affected existing properties. The situation was different for uncapped new-builds, where asking rents continued to rise. In real terms, this means that rents for newly built apartments rose sharply – by €1.22/sqm since 2019 to an average of €15.26/sqm.

Sound foundations for growth: Why rents continue to rise

So , how will the Federal Constitutional Court’s decision affect asking rents in Berlin? Well, it is widely assumed that Berlin’s tenants are facing a new wave of rental price increases. After all, even if the political debate heads in the same direction again – a new law at federal level will be a long time coming and will by no means be as drastic as the Berlin government’s failed project. Based on the current situation, it is highly unlikely that we will see a long-term trend reversal and falling rents.

This assessment is shared by the real estate experts at David Borck Immobiliengesellschaft, who cite another convincing argument: there are currently comparatively few rental apartments available on the Berlin residential market. In 2019, only around 50,000 apartments were advertised on the leading property platforms. And the market continues to shrink: In 2020, the number of advertised rental apartments fell to 33,000. With an above-average median asking rent of €13.70/sqm, Berlin-Mitte has the highest rents, followed by Friedrichshain-Kreuzberg (€12.38/sqm) and Charlottenburg-Wilmersdorf (€12.38/sqm).

Unbroken trend: Purchase prices climb steadily

As the coronavirus crisis drags on, a growing number of city dwellers have developed a hankering for a more stress-free environment with more space for their families. In light of this intensifying trend, it comes as no surprise that house and condo prices are rising rapidly even as rents fall. Averaging €5,083/sqm, a year-on-year increase of €307/sqm corresponds to a respectable increase of 6.4%. Prices for new-build condominiums established a new record, averaging €5,930/sqm.

The situation is very similar when it comes to detached and semi-detached houses. The median house price has more than doubled within the last five years. And with year-on-year gain of 9% over 2019 – equivalent to an average of €50,010 – the median house price in 2020 climbed to around €600,000.

Good investment and retirement provision: apartment, home or apartment building

Crisis-proof, resilient yields, ideal for long-term planning – and providing financial stability in retirement: If you compare the situation for tenants with that of real estate owners, owners are always better off – rent cap or not. Why? First of all, condominiums and houses, whether detached or semi-detached, are extremely popular; especially with capital investors who value security. Another important reason, especially when it comes to buying a house, is the coronavirus pandemic, which has stirred a longing among many city dwellers for a spacious life in the suburbs and exurbs. This is true today and will fuel demand for many years to come.

So there is a lot to be said for buying an apartment or a house. The Federal Constitutional Court’s ruling has significantly restored real estate buyers’ planning security. More than ever, owning real estate offers a lucrative and stable basis for financial peace of mind throughout your retirement.

Of course, everyone needs to decide what is best for them personally. We are happy to advise you – whether you are looking to buy or sell a property. We will assess the value of your property free of charge and without obligation. Our experts will be on hand to guide you through every step of the buying or sales process.

You can find more information on our website:


David Borck Immobiliengesellschaft

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Telefon +49 (0)30 887 742 50 | Telefax +49 (0)30 887 742 525