Rents Still Rising Fast in Major German Cities

Rents in Germany have continued to climb steeply in the first half of 2024, with some areas showing increases in double digits. This trend, highlighted by a recent survey from property consultancy Jones Lang LaSalle (JLL), reveals the ongoing housing shortage and its impact on rent prices across the country. Here are the reasons why Rents still rising fast in Major German Cities.

Increasing Rent Trends in Major Cities

In Germany’s major cities, the pace of rent increases remains above average, although it has slightly slowed compared to last year. JLL reported that asking rents for flats in Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart, and Leipzig rose by an average of 6.3 percent in the first half of the year compared to the same period last year. This is a decrease from the 8.2 percent year-on-year growth observed in the second half of 2023.

The disparity between cities is significant. Berlin saw a substantial 11.4 percent increase in rents, while Cologne experienced a modest 1.4 percent rise. Frankfurt and Leipzig also faced sharp increases, with rents jumping by 9.4 percent and 9.8 percent, respectively.

Rent Increases Beyond Major Cities

Outside of the major urban centers, smaller and mid-sized cities in Germany are witnessing even faster rent hikes. Rents in these areas surged by 8.3 percent in the first half of 2024, up from 4.8 percent in the second half of the previous year. In local communes, the increase was less dramatic but still noticeable, with rents rising by 5.6 percent compared to 5.5 percent in 2023.

Housing Market Dynamics and Future Outlook

JLL’s survey analyzed asking prices for 35,000 rental properties and 41,000 purchase properties across Germany during the first half of the year. Asking rents refer to the initial rental prices set by landlords for new tenants.

The report suggests no immediate relief for Germany’s overheated rental market. The ongoing housing shortage and sluggish construction rates continue to drive rent increases. Despite government efforts to promote housebuilding, including a target of 400,000 new homes per year, progress has been slow due to economic challenges.

High interest rates are another critical factor affecting the housing market. These rates have made purchasing homes more expensive, leading to a correction in home prices. In the first half of the year, prices for owner-occupied flats in major cities fell by 3.6 percent on average, compared to a 7.4 percent decline last year. The steepest decline was in Frankfurt am Main, with a 6.5 percent drop, while Hamburg saw minimal price changes.

Market Shifts Favoring Buyers

The combination of falling purchase costs and rising rents is gradually shifting the market dynamics in favor of buyers. According to JLL expert Sören Gröbel, the sharp rise in rental prices has altered the balance between rental and purchase costs, making home buying more appealing. However, given the recent increase in interest rates, any recovery in the housing market is expected to be slow.

In conclusion, Germany’s rental market continues to experience significant pressures, with rents rising rapidly due to a persistent housing shortage and economic factors. While government measures aim to alleviate these issues, the market remains challenging for both renters and buyers in the near term.

Read More at How to Abroad

How to find the right hospital in Germany when you get sick?

Germany Job Opportunity Card to Be Introduced from June 2024