Sebastian has the crowd in the palm of his hand. Belting out a version of Whitney Houston's How Will I Know?, the enthusiastic Australian gets the 1,500 or so onlookers to join in the chorus before doing an honorary lap around the improvised stage.

He is one of about 50 amateur singers from across the globe who have mustered the nerve to take part in this afternoon's instalment of a Berlin phenomenon: bearpit karaoke.

For the past four years thousands of visitors and locals have been flocking to the open-air karaoke sessions on Sunday afternoons in the Mauerpark, which stretches along part of the former "death strip" between East and West Berlin. Now a decision by the local council could put the hugely popular mass singing session at risk.

Officials have tripled the prices for the permit needed to hold the karaoke, to €1,500 (£1,205), and have stipulated that the shows can only be held on 12 specific dates during the summer.

That could disappoint many of the 30,000-50,000 people who visit the Mauerpark every Sunday. While many are there to check out the sprawling flea market adjacent to the park, the karaoke is undoubtedly also a huge draw.

The singing spectacle came about pretty spontaneously, says Gareth Lennon, the 38-year-old Dubliner who runs the karaoke under the name Joe Hatchiban.

Back in 2009 he and some friends hit upon the idea of cycling around the city with his new cargo bike, equipped with a speaker, laptop and microphone, and trying to film people doing karaoke.

One afternoon he decided to swing by the stone amphitheatre set deep in the steep grassy slope on one side of the park, and see if people would perform. "Within a month or two we were getting fairly full houses, and it has just gone on from there."

Sebastian is a huge fan, having hit the stage here five times. "It's really an amazing advert for Berlin." He first came across it during a holiday last year and it became a major factor in deciding to move to the city. "It absolutely blew my mind."

Luis Valderama, originally from Peru, has lived in Berlin for five years and comes to the karaoke almost every Sunday. "It is really cool to see the people," he says. "When they make mistakes it's funny and when the people try to sing, some are really good but some are really bad too."

The overwhelming popularity of the karaoke has not been enough to persuade the council simply to let things continue as they are. "Special permits for events such as karaoke are only licensable when they are in the public interest," said Peter Lexen of Pankow council in an email to the Guardian.

He says the location is primarily a park and the recreational needs of all visitors must be considered. "Events in a park are an absolute exception."

The council said it also wanted to give other applicants a chance to use the space, something the local Friends of the Mauerpark group warns could lead to commercialisation of the park.

The council also claims that Lennon doesn't provide adequate waste disposal or toilet facilities.

Yet that would prove costly for such a low-key operation. Despite having to pay for a permit, and the royalty fees for the music used, Lennon doesn't charge anyone to participate or watch the karaoke. Instead he leaps into the crowd occasionally during the songs, shaking a collection tin. As for waste disposal, he insists the amphitheatre is one of the few places in the park that is not litter-strewn at the end of the weekend, thanks to his constant appeals to the crowd to take their rubbish with them or use the plastic bags he hangs off the trees that dot the stone steps.

For Lennon the main problem is not so much the higher fee as the constraint of the fixed dates. In previous years he would simply show up when the weather was fine and over the course of the summer would rake in enough donations to pay his way. Now the schedule is set in stone, and he has already had two rainy days in May: "It kind of changes it where there are certainly financial pressures every time to try to make money or to try to cover our costs."

Lennon is going to see how this year goes but says the new rules make things much more difficult. There have been suggestions that he moves the show elsewhere. But he's not convinced. "It's always been the Mauerpark. It has grown organically here," he says. "So it's very difficult to think of it taking place on a regular basis elsewhere."

After all, he argues, it's not so much about the singing as about the unique circumstances that make it such a success. "Karaoke is maybe the vehicle, but it's fuelled by the people and the atmosphere."