The year 2024 marks a turning point for the real estate market. After construction interest rates had risen significantly for two years and the European Central Bank (ECB) had not yet made any interest rate adjustments at the start of 2024, it initiated a turnaround in its interest rate policy in June with a reduction of 0.25 percentage points and in September with a further interest rate cut from 0.25 to 3.5 percent. The latest interest rate cuts and the stabilization of the inflation rate have also significantly reduced financing costs for construction projects and property purchases.
This opens up new opportunities for property buyers and investors after the last few crisis-ridden years, in which the market almost came to a standstill as a result of the energy price crisis, the war in Ukraine and massive interest rate hikes: within the last few months, interest rates for a 10-year mortgage have fallen from over 4 percent to around 3 percent. This could be the key to benefiting from the market recovery and possible price increases in the long term.
At the same time, the Berlin market faces challenges such as a limited supply of housing and rising demand due to continued population growth. These factors make 2024 an ideal time to take a close look at the opportunities of buying real estate.
How falling interest rates are stimulating the real estate market
The ECB has changed its monetary policy course and lowered the key interest rate to 3.5%. After the interest rate hikes of recent years, this is an important turning point. The aim of the interest rate cut is to reduce borrowing costs and support the economic recovery. For property buyers, this means significantly lower financing costs and therefore lower monthly loan installments. Investors also benefit, as the favorable conditions lead to increased interest in the real estate market and restore confidence in the market.
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Favorable financing thanks to interest rate cuts: What buyers can expect in 2025
Lower interest rates on loans are making the purchase of residential property more affordable and motivating many prospective buyers to realize their purchase plans: Specifically, the monthly loan installment for a ten-year construction loan of EUR 600,000 has already fallen by around EUR 500 compared to the end of 2023. This makes home ownership even more attractive for home seekers, especially against the backdrop of steadily rising rents in major cities.
While the experts expect a trend towards further interest rate cuts in 2025, this could lead to an increase in property prices in the immediate and medium term due to rising demand for home ownership. The current interest rate advantage therefore offers the opportunity to benefit from stable rates and possible increases in value in the long term. Early buyers can secure attractive conditions before prices rise further.
Berlin's housing demand is rising: Population growth meets limited living space
The population trend in Berlin has been characterized by strongly positive net migration for years. Between 2022 and 2023, the population grew by around 117,000 people, while only around 33,000 new apartments were completed. Forecasts predict that the city will grow by around 187,000 people by 2040, which will further increase the demand for housing. This will exacerbate the existing housing shortage and demand for affordable housing will remain high. This dynamic influences price trends and leads to increasing pressure on the housing market, which could be reflected in rising purchase and rental prices in the long term.
Construction activity in Berlin on the decline: why less is being built and what that means
Construction activity in Berlin has been declining for years. Of the 21,000 building permits issued in 2017, 14,000 will remain in 2023 and a significant decline is also expected in 2024. The lack of building permits and stalled construction progress on major projects are exacerbating the housing deficit. The situation is particularly tense in districts such as Pankow, where only one of 30 planned major projects, KOKONI ONE, is being realized. In contrast, Spandau has the highest construction completion rate at 45%. These regional imbalances and the decline in construction activity mean that supply will remain scarce in the coming years.
KOKONI ONE: The only large-scale construction project realized in Pankow
KOKONI ONE offers a new approach to living – in an area where carbon emissions are decreasing, and a more …
Back to stability: Why Berlin real estate prices are rising again
After a period of uncertainty, property prices in Berlin are showing the first signs of stabilizing. In the second quarter of 2024, prices in both the new-build and existing property segments rose slightly – by 2.5% and 2.1% respectively. This recovery indicates that buyers are regaining confidence in the market. Currently, asking prices for new builds are around €8,700/m² and for existing properties around €5,800/m². This trend could continue, as demand remains high and the limited supply could lead to further price increases.
Rising rents, rising yields: How investors are profiting from the Berlin rental market
Rents in Berlin have risen continuously since the beginning of 2023, by an average of 2.3% per quarter. In the second quarter of 2024, the average rent for new buildings was €21.95/m² and €16.77/m² for existing properties. This development makes the Berlin rental market attractive for investors, who can benefit from rising yields. In view of the limited construction activity and the high demand for rental apartments, rents are expected to continue to rise in the coming years, which could further boost interest in condominiums.
Are you looking for an attractive investment property for your future financial planning?
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Take advantage of the low interest rates: Why 2024 is an ideal year for real estate purchases
The current market situation offers real estate buyers and investors ideal conditions for entering the Berlin market. The combination of low interest rates, limited supply and stable demand creates an ideal environment for investment. In view of the announced further interest rate cuts, now is the best time to benefit from the fall in real estate prices before the general conditions change again and prices rise.
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