Berlin residential rents pick up pace in H1, ahead of 2020 freeze

Berlin set the pace in Europe in terms of growth in residential rents during the first half of 2019, posting an increase of 3.9% compared with the year-earlier period, research from Savills shows.

Compared with the previous six months, rents in the German capital rose 3.4%, the Savills World Cities Prime Residential Rental Index revealed. However, strong capital price growth kept yields in Berlin close to the index average at 3.1%.

Berlin is the top-ranked European city in the global index, taking second place behind Los Angeles which booked rental growth of 4% in the first half of 2019.

The research comes at a time of increasing tension among Berlin’s residential landlords over a rental cap set to come into force from next year. The freeze (Mietendeckel) is being implemented to halt the march of gentrification which critics say is making the city unaffordable, after rents rose by 50% since 2011.

Comprising 21 cities, Savills’ index shows that only seven of those – Los Angeles, Barcelona, Berlin, Tokyo, Hong Kong, Beijing and Shanghai - saw annual rental growth above 3%. 

In the year to the end of June 2019, capital values across the index slowed to 0.7% annually, pushing yields up to 3.2%.  However, while cities are beginning to converge in terms of rental growth levels, yields remain much more widely spread, from Los Angeles and Moscow at 5.2% and 5.0% respectively to just 1.5% for Guangzhou, one of four Chinese cities yielding 1.7% or under. 

‘While there are variations at an individual city level, the trend across both prime rents and capital values in leading world cities is broadly stable,’ said Sophie Chick, head of Savills World Research.  ‘Very few cities are seeing annual rental growth above 2%, a trend we expect to persist, given prevailing global political and economic headwinds.’

Prime London rents also slipped slightly, by -1.3% year-on-year, but latest evidence from the market suggests a return to rental growth in the second quarter of the year.  Strong market activity, in spite of Brexit uncertainty, helped to reduce the balance between supply and demand. 

‘Leading world cities will continue to be magnets for an increasingly global young, affluent workforce and this will support demand for prime rental properties,’ Chick said.

 

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