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The Challenging State of Germany’s Rental Market: Rising Rents and Housing Shortages

The Challenging State of Germany’s Rental Market: Rising Rents and Housing Shortages

Germany’s rental market is currently facing significant challenges, with rents projected to rise dramatically and a severe housing shortage affecting tenants across the country. In this article, we will delve into the factors contributing to these issues, analyze the rental trends in Germany’s major cities, and explore potential solutions to this pressing problem.

Housing Shortage and Rising Rents

The German Tenants Association warns of tough years ahead as it expects rents to continue rising significantly. The number of households spending 40% or more of their income on rent is expected to increase drastically, affecting over five million households in the coming years. The average ‘cold’ rent per square meter in existing properties is predicted to reach €10, up from €8.70 in 2022.

Government’s Housing Construction Target

The coalition government’s ambitious target to build 400,000 new homes annually has fallen far short. In 2022, only 295,300 homes were completed, leading to a housing deficit of around 700,000 apartments in Germany. The lack of new homes is exacerbating the housing shortage and affecting those in urgent need of affordable housing.

Rental Trends in Major Cities

    1. Berlin: The capital is experiencing a sharp increase in rental prices, with the average rental price per square meter rising by 27% from November 2022 to February 2023. The city now ranks as the second most expensive in Germany for renters.
    2. Hamburg: Rents in Germany’s second-largest city have also been rising steadily, with landlords increasing basic rents by an average of 18% over the past five years.
    3. Munich: Munich holds the title of the most expensive city in Germany to rent in, with an average rental price of €17.39 per square meter. Rents rose by 9.2% for existing apartments and 12.8% for new builds in 2022.
    4. Cologne: Compared to other major cities, Cologne’s rents have been increasing at a steadier pace, with rents rising by 5.9% for existing apartments and 9.5% for new buildings in 2022.
    5. Frankfurt am Main: Rents in Frankfurt rose by a moderate 5.9% for existing apartments and 6.2% for new builds in 2022.

Causes of the Housing Shortage

Factors contributing to the housing deficit include higher financing costs for construction projects due to increased interest rates and building material prices. Increased immigration, especially from refugees fleeing Ukraine, is also adding to the demand for housing.

Predictions and Solutions

Experts predict that rising rents will continue to prevail in the real estate market. To address the housing shortage, the government needs to provide around €10 billion in funding to boost new construction projects. Some experts advocate ending the rent brake to incentivize more construction, while others call for streamlined approval and planning procedures.

Germany’s rental market is facing a severe housing shortage, leading to rising rents and financial strain on tenants. Government’s housing targets missed; urgent action needed to alleviate the housing crisis and meet demand for affordable housing. To tackle this pressing issue and ensure affordable housing for the citizens of Germany. The government should increase funding for construction projects and streamline procedures. Additionally, implementing strategic immigration policies could also play a crucial role.

Read more at How To Abroad:

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