Berlin has emerged as the frothiest property market in the world, with the city engulfed by expensive highrise developments and speculative buying that threatens its traditionally low rents and hip arts scene.
Prices in Berlin jumped by 20.5% in 2017, according to the property consultancy Knight Frank, with other German cities also displacing cities in China in terms of rising prices.
Berlin, Hamburg, Munich and Frankfurt were ranked in the top 10 in the world for price rises, with several Dutch cities not far behind.
London was ranked 101st, with a 2% gain, while Auckland in New Zealand, once gripped by a property frenzy, dropped to 99th with a 2.2% increase.
But attempts by the authorities in Vancouver to quell its soaring prices - including a 15% foreign buyer tax - appear to have stalled, with prices in the Canadian city jumping by 16% in 2017, the fourth fastest in the world.
Berlin’s move to the top of risers followers several years of soaring prices; the average property price has increase by more than 120% since 2004.
Foreign buyers have flocked into Berlin’s residential and commercial property market, with the US investor Warren Buffet agreeing a deal last month to acquire a top-end real estate agent in the city that sells apartments for as much as €3.8m.
The boom has been fuelled by cheap borrowing and a fast growing population. The city’s population has grown by about 50,000 a year over the past five to 3.5 million. It is projected to reach 4 million by 2035.
The surge in prices has prompted warnings of a bubble waiting to burst. In February, Germany’s central bank, the Bundesbank, suggested that property in many German cities was at least 15% overpriced and could be as much as 35% overpriced in Berlin.
But to buyers from London or New York, Berlin remains cheap even after years of 10% annualised rises. Apartments in prime parts of the German capital fetch only about a third of the price of equivalent-sized properties in London.
On immowelt.de, a popular German property website, apartments in NeuKölln, which is regarded as one of the hippest neighbourhoods, can be found €175,000 and are marked by the agents as “Ihr cleveres investment”.
Commercial property is also booming. Berlin’s Sony centre complex, emblematic of the city’s regeneration after the fall of the Berlin Wall, was bought for €1.1bn in October by the pension fund of Ontario’s municipal employees. Meanwhile Norway’s state pension fund has paid about €400m for the Mitte headquarters of media group Axel Springer.
Ten fastest rising property markets in the world in 2017
Hong Kong 14.8%
Source: Knight Frank global residential cities index