Home prices in Berlin outpace rents

Advertised prices for Berlin flats rose more than twice as fast as rents in June as housing demand in Germany's capital outpaced construction and low borrowing costs encouraged buyers.

An index measuring asking prices for flats in the city in June rose 15.6 points from a year earlier to 161, while a rent index rose 7 points to 140.7, according to data compiled by online broker Immobilien Scout.

"It would be misleading to attribute this to the start of a bubble," said Michael Kiefer, Immobilien Scout's chief analyst. "Other factors, led by demand, play an important role."

More people are buying homes in Berlin as the city attracts professionals with higher incomes and investors take advantage of low interest rates. At the same time, legislators plan to introduce new rules to keep rents in check.

Officials in cities including Hamburg, Berlin and Munich plan to make it unlawful to raise rents in certain neighbourhoods by more than 15 per cent over a three-year period, officials said last year.

Berlin posted the strongest price gain among Germany's five biggest cities, followed by Munich, which had a 12.2-point increase.

Across Germany, prices and rents rose more slowly, both measures gaining 5.3 points, Immobilien Scout said.