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PROPERTY

Berlin rent rises outstrip rest of country

Rents in Berlin are rising at almost twice the national average, increasing faster than anywhere else in the country in December, according to figures released on Tuesday.

Berlin rent rises outstrip rest of country
Photo: DPA

The Federal Statistics Office said Berlin rents grew by 2.5 percent in December 2013 on the same month in the previous year compared to an average rise of 1.6 percent in the rest of the country.

“In many regions of Germany the tenant can not complain about dramatically rising rents," the office said in a statement.

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Destatis said that rents were growing fastest in university towns and cities particularly for new leases. In eastern states, for example, they rose by between 0.3 and 0.9 percent.

The statisticians also pointed out that rents have risen at a slower rate than inflation from 2005 to 2013 at 9.8 percent, with the consumer price index rising by 14.3 percent.

And Germany remains a nation of tenants particularly in larger cities. Home ownership rates in Berlin and Hamburg are 15.6 percent and 24.1 percent, that compares to 45.6 percent nationally.

The average rent in Berlin is €10.52 per m2, €15.81 in Munich, €11.72 in Hamburg and €13.11 in Frankfurt, according to property portal Immowelt.

READ MORE: Top 10 reasons you should move to Germany

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PROPERTY

Why house prices in Munich are starting to fall

The real estate market in the southern German state of Bavaria is changing due to the precarious economic situation, a new report has found.

Why house prices in Munich are starting to fall

What’s happening?

Germany’s largest state – Bavaria – is known for many positive things, such as stunning nature, culture and festivals. But it also has a reputation for being an expensive place to live. Many cities, especially Munich, are notorious for having some of the highest rental and property costs in the country. 

But it looks like the trend of rising house prices is beginning to dampen. 

According to the latest report by the Real Estate Association Germany South Region (IVD Süd e.V.), inflation and increased mortgage interest rates have put an end to the period of significant hikes in the Bavarian real estate market – at least for the time being. 

“The rapidly growing financing costs and the uncertainties associated with the impending recession in Germany as a result of the Ukraine war are inhibiting the dynamics of market activity and, in particular, the price dynamics in the residential real estate market,” said Professor Stephan Kippes, head of the IVD market research institute.

It reflects a general trend that we’ve been starting to see in Germany as the tough economic situation bites. 

According to a recent study by property search portal ImmoScout24, the number of people buying houses in Germany fell dramatically in the second quarter of 2022. And In many of the major metropoles, property prices also went down as people struggled to find interested buyers.

READ ALSO: How property prices are dropping in major German cities 

Where can we see this trend?

The price changes can be seen clearly in the state capital Munich, reported regional broadcaster BR24.

According to the study, the average property price, which was €9,500 per square metre in spring, has now dropped to €9,450. 

In some Bavarian cities, the trend reversal is not yet as noticeable. In Nuremberg, for example, property prices are still rising but at a slower rate than previously seen. The price of a property in spring was on average €3,630 per square metre, and is now €3,710, according to the study. 

Experts say it shows how the situation is developing. 

“The state capital of Munich, where the first price declines for residential real estate were identified in the fall of 2022 for the first time in a long time, could serve as a seismograph for future developments in Bavaria’s large and medium-sized cities,” said Kippes. 

Homes in Erfurt, Thuringia.

Homes in Erfurt, Thuringia. Photo: picture alliance/dpa | Martin Schutt

Interest increases for buyers

At first glance, this development could seem tempting for those looking to buy property in Germany.

But Kippes points out that buyers are hardly benefitting from the decreasing prices – because interest rates have risen. 

“A few months ago, you could get an interest rate of 0.8 percent,” said Kippes. “If we take a purchase price of €500,000, let’s assume that €150,000 is equity and a €350,000 loan is needed; two percent repayment, 10 years fixed interest rate. Then, you would have paid €817, but today it would cost you €1,473.”

The IVD study said that the historically low-interest rate level of the past years in Germany “made it possible to compensate, at least partially, for the massive increases in purchase prices in many places”.

READ ALSO: The rules foreigners need to know when buying property in Germany 

“Now that the relief provided by low-interest rates has largely disappeared, but at the same time purchase prices have remained at dizzying heights, owner-occupiers in particular, who traditionally often finance with a high proportion of borrowed capital, are increasingly dropping out as buyers,” said the study. 

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