Affordable housing requires more new buildings

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Julia Ptock

Mar 19, 2021
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Berlin, 19. March 2021 --- In 2020, Berlin again issued fewer building permits than in the previous year. According to the Berlin-Brandenburg Statistics Office, 20,459 approved apartments were reported last year. And thus 9.2 percent less than in 2019 (22,524 apartments). According to the office, the negative trend in residential construction has already continued for four years.

"For years, we have seen the prices of real estate in Berlin rise. If fewer apartments are built again now, this will exacerbate the situation for rental and purchase prices," says Dr. Chris Mulder, co-founder and CFO of Hypofriend, assessing the development. Mulder worked at the IMF (International Monetary Fund) and the World Bank after getting his Ph.D. in economics in London. Together with his son Nick Mulder and later with Pavel Jurasek, he founded Hypofriend in 2017. 

"In the last ten years, prices per square meter for existing properties in Berlin have tripled, and more than doubled for new buildings. This reflects the massive growth in jobs in Berlin. With a renewed reduction in the number of new buildings, the trend will continue in the coming years," Mulder continues. "And the same is true for rents. With the rent cap, the supply of apartments and houses will be reduced as people hold on to their cheap rents."

Rising income and lower interest rates have an impact on affordability

Still, Mulder gives the all-clear. "There are regular warnings about overpriced real estate. However, the focus of the analyses is on the relatively rapid price increase of the last five years. If, on the other hand, one looks at the development over the last 45 years, it is noticeable that the prices for real estate in Germany are moderate. The reason: Germany avoided the real estate bubble which the rest of the world suffered from, by promoting house building after the unification. That's why Germany and Berlin are currently at a very different level than most other countries when it comes to real estate prices."

Historical data shows that real estate in Germany is still very affordable today. Rising incomes as well as the decline in interest rates for real estate loans, from about 6.5 percent in 2000 to an average of about 1 percent in recent years, have had a decisive impact on so-called 'affordability'. Even recent price increases have hardly affected this improved affordability. But to keep it that way, Berlin in particular needs more affordable housing. "However, if the number of new apartments falls for four years in a row, it will become increasingly difficult over time for buyers to find an affordable apartment," Mulder sums up.

About Hypofriend

Hypofriend is Germany's fastest growing independent mortgage advisor. Founded in 2017 by Nick Mulder, his father Dr. Christian Mulder and later by Pavel Jurasek, the startup helps its customers make smarter financing decisions. Through its self-developed advisory and recommendation software, complicated correlations are presented in a detailed and understandable way. The team of nearly 40 engineers, economists and mortgage experts has already helped thousands of customers better understand housing finance and fulfill their dream of buying a property in Germany.

Contact

Julia Ptock | Content & PR Managerin | Email: Julia@hypofriend.de

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Julia Ptock

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