Jefferies International Limited has reported that it believes that compression in Berlin residential is fading out this year and it estimates gross yields to reach a record low of about 3.4% by the end of the year.

Thomas Rothaeusler, equity analyst at Jefferies, said: “Affordability levels are declining as rents continue to outpace wages, putting the housing topic increasingly into the public and political spotlight - reflected in intensified press coverage and an increasing number of political initiatives on a national as well as federal level, most calling for tougher rent controls. Berlin with the highest rent dynamics and a left-wing government is specifically in the focus. Tighter rent controls and an adjustment of the rent index are currently in the making with the intention to limit rental growth.

“Berlin residential dynamics are still strong, but momentum has been declining over the last 18 months. Condo prices are currently up 18% over the past year and rents are up 10% during the same period.”