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REAL ESTATE

Why are rents in Germany shooting through the roof? We found out

Anyone who lives in one of Germany’s larger cities will be aware that rents have been rising sharply in recent years. But what is causing this surge and what can be done? We talked to one of the country’s leading specialists on the rental market to get some answers.

Why are rents in Germany shooting through the roof? We found out
Renovation work on a Berlin apartment. Photo: DPA

This article is available to Members of The Local. Read more Membership Exclusives here.

From the point of view of the German tenant at least, the strength of the German economy can feel like something of a poisoned chalice.

As countries in the south of Europe struggled to tackle high unemployment after the 2008 financial crisis, droves of Spaniards, Italians and Greeks decided to up sticks and start anew in Germany.

Add to that east Europeans who were suddenly able to migrate to western Europe and hundreds of thousands of refugees, and you have a lot of pressure put on the German rental market, says Reiner Braun, who leads research on the real estate market at consultancy firm Empirica.

“More people has meant more demand for apartments,” he says.

But it isn’t just migration from abroad that is creating a bottleneck in the German rental market.

“People are leaving rural areas and moving into the cities. That’s something that we’ve seen in China, Africa and America, but which didn't affect Germany in the past. Now there is a huge movement of people under 35 into the cities. This factor alone would have caused a strong rental rise.”

Government caught off guard

According to Braun, German authorities have been caught flat footed by this surge of people towards the bright lights of Berlin, Hamburg and Munich, but also to smaller so-called “swarm cities.”

“A decade ago everyone in Germany thought that the country’s population was going to shrink, that demand on the rental market would shrink and that the amount of empty apartments would go up. So both government and investors ignored signals from the market that suggested otherwise for a long time,” he says.

Even when real estate investors realized that something was up though, they couldn’t just start building.

Local governments had been cutting personnel to save money, Braun says. “And when they made the cuts they did it where they needed people least, in the building authority.”

In other words, the specialists who had to survey the land and assign it for building were no longer there. And finding new ones isn’t necessarily easy when the private sector can offer engineers much better salaries.

SEE ALSO: 'In Berlin’s housing market people are getting mad, getting scared'

People power

It isn’t just local government that has thrown a roadblock in front of much needed development though, Braun says.

Citizen protests have regularly hindered the creation of new building developments.

“There is the totally normal reason: people have a ‘not in my backyard’ mentality,” he explains.

“But the fear of gentrification is another [reason]. People equate new builds with rent rises. That seems true because new builds are more expensive and so people fear that in neighbouring buildings the rents will also go up. In fact, the rents go up when there isn’t enough supply and would have risen without the new builds next door to them.”

Demonstrators occupy a house in Berlin. Photo: DPA

One recent example of citizens’ action on apparent injustices in the rental market is met by particular scorn from Braun.

In May activists occupied several buildings in Berlin to highlight what they claimed was a high number of properties which are bought by speculators and then left empty for years before being sold at a profit.

“That is complete rubbish,” says Braun. “There are no houses lying empty due to speculation. It is a crazy left-wing idea that the lack of available housing has something to do with speculation.”

While the capital did have around 100,000 empty apartments two decades ago, that number has dwindled to almost nothing now, he says.

“Our research shows that there around 18,000 empty flats now – or around 1 percent of the total stock. But this can be explained by the fact that there needs to be a few empty flats so that people can move house. There always has to be apartments which need to be renovated which can also take some time,” Braun points out.

Where the rents aren’t rising

Another issue which is often ignored in reporting on Germany’s rental rises is that the majority of the population isn’t affected.

Braun estimates that two thirds of the German population has not felt the effects of the rental increases. Those who live in rural areas may have even benefited from lowering rents as the flight of the young to the cities has created an excess of supply.

READ ALSO: Germany's controversial rent control law works after all (at least in central Berlin)

Even in the cities though, rents aren’t rising everywhere. Germany’s strong pro-tenant laws protect long-term tenants from rent rises.

“Legally, the rent can only be raised by between 15 percent and 20 percent within three years. And one isn't allowed to put up the rent [on an old contract] higher than the rent index, which is assessed every four years,” says Braun. “The ones who suffer most are mobile young people who need to move home.”

Fixing the problem

Making the countryside a more attractive place to live is part of the cure, Braun says.

“Germany’s rural areas are unattractive for two reasons,” he explains. “Firstly, there is poor mobile phone and broadband coverage. Secondly, you are stuck if you don’t have a car since most public transport there has been discontinued.”

“A common misconception though is that are too few jobs in rural areas. That’s not true. We’ve found that there are more job openings per capita in the countryside than in cities like Hamburg, Munich and Berlin.”

The difference though is that the highly-qualified jobs are mainly in the cities. And not only are ever more young Germans going to university, they are marrying other highly qualified professionals.

“In the old days, the doctor married the nurse. Now he marries the head doctor – and that makes it hard for them both to find jobs that fit their qualifications in the countryside,” says Braun.

A new build in Berlin. Photo: DPA

Secondly, he says, politicians need to make it easier for investors to build.

In Berlin, where the housing deficit is among the accutest in the country, years-old plans to build large new settlements at the edge of the city have never left the drawing board.

Braun blames this on Die Linke, the far-left party that are a powerful force in Berlin politics.

“Die Linke have a problem with migration to the city. They say that if we build more, more people will come here. That is wrong-headed. People will come anyway, and the incomers are generally better paid and put pressure on those already here.”

He also laments poor policy making at the federal level.

The German government aim to ignite a building boom by subsidizing the construction of new housing via tax benefits.

“But subsidies only make sense if investors don’t want to build,” says Braun. “Low interest rates mean that investors are really keen on building.”

“The building isn’t happening because the state hasn’t set aside land to build on. Subsidies, by creating more demand, drive up the cost of the land and thus the building costs. So this is completely wrong policy.”

Nonetheless, there is some sign that supply is finally starting to catch up with demand. Whereas five years ago around 5,000 newly-built apartments were coming onto the market in Berlin, that number has now risen to 16,000 a year. That is still well below the estimated 25,000 that Emperica has found to be necessary.

“I don’t think we are going to manage that any time soon. Political resistance is still very high. The price rises might well calm down a bit, but the lack of apartments will last for another four or five years,” Braun predicts.

FOR MEMBERS: The beginner's guide to buying a home in Germany

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EDUCATION

What foreign parents in Germany need to know about Sprach-Kitas

Germany has a number of specialised nursery schools that focus primarily on helping children with their German language skills. Here's what foreigners need to know about them.

What foreign parents in Germany need to know about Sprach-Kitas

What even is a Sprach-Kita? 

A “Sprach-Kita”, or Language Kindergarten, is a special type of nursery school that’s been around in Germany since 2016 under the government’s Sprach-Kita Programme. The main aim is to help young children build up their German language skills to a level that will allow them to succeed at school. 

How is this different to a normal Kita or daycare centre?

Unlike most Kindergartens in Germany, Sprach-Kitas employ staff who are specifically trained in language teaching and acquisition. These specialists are paid for through Sprach-Kita Programme funding and help to shape the environment of the nursery school, making it easier for children to develop their German skills in an everyday setting.

The schools also have access to external support and advice on catering to children with language setbacks, and may work closely with parents to encourage further language development at home. 

Since the scheme was set up in 2016, around 7,000 nursery schools have successfully applied for “Sprach-Kita” status and received at least €25,000 funding through the programme. These were mostly Kitas that had already taken in a higher-than-average number of children from foreign backgrounds, such as those in popular migrant or expat areas.

Sprach-Kitas will generally be much more diverse and focus most heavily on children’s language skills, in addition to teaching young kids about cultural inclusivity.  

READ ALSO: ‘Multilingualism is an enrichment, not a deficit’: Raising bilingual kids in Germany

Who are Sprach-Kitas for?

Any young child in Germany is allowed to go to a Sprach-Kita, but the main target audience for these specialised nurseries are the children of foreign parents.

In households where German isn’t the main language spoken, children may struggle to keep up with their classmates at school due to their lower level of German fluency. That could be because the child has two international parents – such as a French mum and an English dad – or because the child has more contact with a parent who doesn’t speak German. 

According to recent statistics, around one in five nursery-age children in Germany doesn’t speak German with their parents at home. That equates to 675,000 children in total. In addition, around 40 percent of nursery school children come from a migrant background. 

Through the Sprach-Kita Programme, government is hoping to help these children integrate at an early age to set them up fully for life in Germany. 

READ ALSO: EXPLAINED: The rise in multilingual children in Germany

Do I have to pay for a Sprach-Kita? 

Parents usually have to pay a monthly fee for their child to attend a German nursery school – and the same applies to Sprach-Kitas. The fee structure is generally set by the local government, meaning it can vary widely across different regions of the country.

However, you won’t pay any more (or less) for a Sprach-Kita than you would for an ordinary nursery school. 

Where can I find a Sprach-Kita?

Around one in eight Kindergartens in Germany is currently a Sprach-Kita, meaning they aren’t particularly hard to find.

To look for one near you, the best thing to do is to hop onto the government website and look on this interactive map detailing all of the Sprach-Kitas in Germany. 

Children ride tricycles at a German kindergarten.

Children ride tricycles at a German kindergarten. Photo: picture alliance/dpa/mauritius images / Westend61 / M | Westend61 / Mareen Fischinger

However, partly due to staffing shortages, Kita places in Germany are highly competitive right now – so securing a place may involve getting in touch with a number of them at an early date. 

READ ALSO: How can Germany improve its Kitas amid teacher shortage?

Is there anything else I need to know?

Currently, the funding for the Sprach-Kita Programme is due to end at the end of 2022 – and it’s unclear what the fate of the existing language-focused nursery schools will be after this happens.

Though the three parties of the traffic-light coalition had pledged to extend the scheme in their coalition contract, it appears that the programme was one of the first victims of savage negotiations over next year’s budget.

That means the federal government are now hoping to transfer the responsibility for funding the language support over to the 16 states.  

“Responsibility in the area of daycare for children lies with the states and cannot be permanently financed by federal funding programmes,” a spokeswoman for the Family Ministry told Welt. 

The Ministry for Families has also pledged to make language acquisition a cornerstone of its forthcoming Good Childcare Act, which will see at least €2 billion in federal funding made available for nurseries in 2023 and 2024. 

That could make it possible for existing Sprach-Kitas to remain in place as specialised centres for language support. 

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