TV-Report on the Spanish public TV about the real estate market in Berlin

Interview to Elena Noman, BRICKBeRLIN GbRs Partner Manager

The report was issued on the evening edition of the newscast of June 26, 2011.The BRICKBeRLIN team was really satisfied because of two reasons:

First of all, the report reflects a reality that we had long predicted: Berlin is a great investment opportunity.

Secondly, because among the several estate agents in Berlin, TVE offered BRICKBeRLIN the chance to take part in the report, which means recognition for us and an opportunity to make ourselves known throughout Spain.
The TVE report says among other things that "some German cities are experiencing a boom in prices that some experts compare with the Spanish bubble a few years ago ..." and that "... Berlin has province real estate prices, but it is actually one of biggest European capitals".

Great news for all investors, since that gives us the opportunity to identify a price fast rise in their early stages.

To give you an idea of what the housing boom represented in Spain. It began in the 90s and according to the Spanish Ministry of Housing, the historical evolution of the average house price in €/m2 was the following:

• Year 1995: €693/m2
• Year 1996: €694/m2
• Year 1997: €703/m2
• Year 1998: €757/m2
• Year 1999: €829/m2
• Year 2000: €893/m2
• Year 2001: €993/m2
• Year 2002: €1,165/m2
• Year 2003: €1,380/m2
• Year 2004: €1,618/m2
• Year 2005: €1,824/m2
• Year 2006: €1,991/m2
• Year 2007: €2,086/m2
• Year 2008: €2,019/m2
• Year 2009: €1,892/m2

According to these data, house prices in Spain were multiplied by 3 between 1995 and 2007. Please, keep in mind that these prices are an average for the full country. In cities like Madrid or Barcelona, the price increase was even greater.

That means that someone who bought an apartment in Spain between 1993 and 1995 obtained at least an appreciation over 250% ten years later. That represents 10% per year cumulative for 10 years. Very few investments can boast a career as brilliant and sustained over a decade.

The BRICKBeRLIN team thinks that the increase that the prices will experience in Berlin will be milder than in Spain since the former experiences of other European countries will help the German government to take the right measures to slow down such property bubble. However, these measures have not been taken yet and when they will be taken, they will need some years to come into effect because the property sector has a large inertia. For instance, the authorities have already publicly declared that around 60,000 new homes would be needed in order to keep affordable rental prices. But how long will it take to build 60,000 new homes that have not been planned yet? And when they are built, will they be in central locations with good transport connections where the people like to live? All these issues drive us to conclude that the prices will continue rising for several years and that those who invest now have a high probability of getting a substantial overvalue in eight or ten years time.

We could also draw the same conclusion if we analysed data and statistics from some other sources like the following:

• First of all, the rise of prices is not a phenomenon unique to Berlin, but this affects all major German cities. According to our reckoning based on the latest data produced by German consultant company Empirical Ag, the average price increase (in € / m2) on flats from 60 to 80 m² in the top 20 cities in Germany during 2012 has been 5,14%. In Berlin, the increase was 6.44%. In other words, Berlin is following and slightly exceeding the price growth that occurs in the whole of Germany.
• Secondly, the average house price in the five major German cities is currently 28.5% higher than prices in Berlin. Last year this difference was 30%. The distances are cutting down and they will keep on cutting down. However, Berlin has still a long way to align its prices with other major German cities. 

The price increase in Berlin began to be clearly detectable in 2009 (3.25% increase) and such rise has been confirmed without any hesitation in 2010 (4.70%), in 2011 (more than 8%) and in 2012 (more than 6%). This rise confirms what we had estimated from other information: in Berlin mismatch between the (low) housing supply and the (increasing) housing demand. The prices will keep on rising within the coming years, until this difference will be equal.

It is not difficult to understand: Berlin is a beautiful and friendly city, increasingly attracting more tourists and visitors; it is also the capital of the most prosperous country in Europe. Furthermore, it is the seat of the German government (and therefore, it will attract not only the public administration offices, but also the headquarters of all major German companies and multinationals settled down in Germany). All that means new jobs and influx of workers and professionals. All of them will need homes for sale or rent. And all of them will look for vacant homes in well-connected neighbourhoods where people enjoy living. But the number of homes with these features is limited and its rise cannot be improvised.