Regional Studies, Regional Science

In this work, we use residual values obtained from an estimated hedonic pricing model to assess the role of district-level neighbourhood effects for the spatial variation in quality-adjusted rental prices in Berlin between 2008 and 2013. By doing so, we also aim at identifying hot and cold spots of quality-adjusted rental prices for apartments across the residential locations within the city of Berlin. The resulting pattern of ‘residual’ rental prices with a growing concentration of hot spots in central districts of Berlin can be interpreted as the tenants’ valorization of apartments in geographic proximity to the city centre compared to similar properties in Berlin’s periphery once we control for the properties’ physical characteristics. The observed temporal evolution of the rental price distribution between 2008 and 2013 thereby hints at an ongoing gentrification process in Germany’s capital associated with the current housing market boom. This visual impression is also confirmed by the application of quantile regressions for a correlation analysis between quality-adjusted rental price values and Berlin district-level characteristics obtained from the last census in 2011. Among other factors, we find that districts’ net in-migration balances are positively correlated with quality-adjusted rental price levels for higher quantiles of the distribution, thereby potentially proxying the price dynamics of underlying gentrification processes. Using statistical tests from the explanatory spatial data analysis (ESDA) toolbox, we finally pinpoint particular hot spots of the city’s residential property market associated with a significant spatial clustering of similar rental price values around individual observations.