Berlin rental cap leads to less supply of affordable rental apartments

• Number of offers of capped apartments dropped by around 56 percent
• Net cold rent of uncapped apartments increased by about 14 percent
• Net cold rent for capped apartments dropped by about 4.5 percent

The PropTech company PriceHubble, which specialises in data-driven real estate and market analyses, has examined the effects of the Berlin rental cap in a recent study. For the analysis, a net total of around 100,000 apartment offers posted on major real estate portals during the past two years in Berlin were analyzed. A distinction was made between apartments that were built before 01.01.2014 and for which the rental cap is therefore applied ("capped rental apartments") and those apartments that were built after 01.01.2014 and can therefore continue to be offered as "uncapped rental apartments". 

Apartments affected by the rental cap are taken off the market

The number of offers of capped rental apartments has significantly decreased by about 56 percent after the regulation came into force, while the offers of uncapped rental apartments in the market have only slightly decreased by 9 percent. Since a significant decline is only observed for capped rental housing, exogenous shocks affecting the entire market, such as the Corona pandemic, can be ruled out as an explanation.

"It can be assumed that many owners, especially private capital investors, are observing the developments on the market with caution and are thinking about selling their property," explains Christian Crain, Managing Director of PriceHubble Deutschland GmbH. "A large proportion of these apartments could thus be permanently removed from the rental stock, because if they can no longer be profitably rented, they could be converted into condominiums and sold at free market prices at the current historically high market level."

Net cold rents of uncapped rental apartments rise three times as much as rents of capped apartments drop

The sharp decline in supply of capped rental apartments could be a major reason for the significant increase in rents of uncapped rental apartments by about 14.1 percent from 14.81 euros per square metre to 16.90 euros per square metre. 

In contrast, the rents of rental apartments affected by the rental cap have only dropped by about 4.5 percent from 11.48 euros to 10.97 euros per square metre in the same period. 

“Our analysis shows that with the rent cap there is not more, but less affordable housing available, and thus exactly the opposite of the actual intention of the ordinance has come to pass," says Crain. "This once again makes the Berlin market a seller's market and we expect purchase prices for condominiums to continue to rise here."