Berlin has the fastest-rising house prices in the world

On the up.
On the up.
Image: Reuters/Fabrizio Bensch
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The German capital’s days as a bohemian haven of affordable living appear to be numbered.

According to a report from property consultancy Knight Frank, property prices in Berlin soared by nearly 21% last year, putting it the top of the 150 world cites it surveyed. The German cities of Hamburg, Munich, and Frankfurt all experienced price growth of between 13 and 15% too, putting them in the top 10.

Knight Frank found that average global prices increased by just 4.5% in 2017, down from 7% in 2016.

The fact that residential property in Berlin is still affordable compared to, say, New York or London, has encouraged an influx of foreign investors—including Warren Buffett, who last month inked a franchise deal with Berlin-based luxury apartment company Rubina Real Estate.

The triple whammy of foreign investment, low-interest rates, and a booming population has caused the Berlin property market to explode. Fitch Ratings said this week that residential property prices across Germany have risen by 60% since 2010, with an 8.6% rise last year alone, bolstered by cheap borrowing costs and robust economic growth. Fitch believes, however, that this growth rate will dampen as mortgage rates increase.

The German central bank is keeping a wary eye on the real estate sector too, warning in February that prices may be overvalued by as much as 35% in Berlin.

These rocketing house prices are a problem for many Berlin residents and rental prices aren’t any better. The Bundesbank said in its February report that rent costs for new leases increased by more than 9% in Berlin in 2017. A new study from the Hans Böckler Foundation (link in German) this week warned that Germany has an acute shortage of affordable apartments—demand for affordable houses currently outstrips supply by 1.9 million in Germany, and by 310,000 in Berlin alone.