Much of the increase was driven by low interest rates. Mortgage rates more than halved, allowing people to borrow much more with the same income. Supply is comi

Much of the increase was driven by low interest rates. Mortgage rates more than halved, allowing people to borrow much more with the same income. Supply is coming (construction activity is at record highs) but will take some time to take pressure out of the market. Germany has always had very low home ownership rates. The influx of migrants has put some pressure on rents (esp on the low end of the spectrum) but hasn't caused the surge in prices for houses or luxury flats. That was mostly driven by a booming job market, higher wages and low interest rates. Berlin was always very cheap compared to other German cities. What we've seen now is more a normalisation than a bubble. But it certainly took some pressure of other markets that already were at very high prices. Luckily, zoning laws in Germany allow new supply and there's a lot of that coming in soon. Some economists expect prices to fall by up to 20-30% in some areas over the next years as supply comes in and interest rates go up (likely starting 2019). That would probably be a healthy correction, easing the tensions that have developed.