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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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For members

HEALTH

7 things to know about visiting a doctor in Germany

Going to the doctor when you're living abroad is a necessary part of life, but it can feel a little daunting. Here are some cultural quirks to look out for in Germany.

7 things to know about visiting a doctor in Germany

Germany is known for having one of the best healthcare systems in the world. 

But there are some cultural differences that can take a bit of getting used to when you’re not from the country. 

Here’s a look at what you should keep in mind. 

You might have to pay at the doctor

People used to a healthcare system that’s free at the point of contact, such as the NHS in the UK, may be a little confused if they are asked to pay money at a doctor’s appointment. 

But the fact is that certain things will not be covered by your health insurance in Germany, and some optional extras could require that you have to dip into your wallet. 

For instance, many gynaecologists may offer to carry out an optional pelvic ultrasound check during a Pap smear test. If it’s not covered by your insurance, they will state in the appointment that it is an extra cost so you can decide if you want to pay for it or not. 

You should also ask if you have to pay for it upfront at the practice or if it will be sent out as a bill. 

Similarly, other specialists may also offer extra services that you could pay extra for. 

READ ALSO: ‘It works’: Your verdict on the German healthcare system

You’ll get different types of prescriptions

Another point to watch out for is that there are different kinds of prescriptions. A prescription (Rezept) given out on pink slips is usually given to people on statutory health insurance. People have to pay a reduced contribution – usually around €5-€10 – when picking up prescription medicine at the pharmacy. 

Patients with private insurance in Germany are more likely to be given a blue-coloured prescription slip. Private customers have to pay for their medicines in full before their insurance company reimburses them. You can also be given a blue slip if your public health insurance doesn’t cover the treatment.

Green slips include treatment that the doctor recommends. Meanwhile, yellow prescriptions are issued by the doctor for special controlled substances and are only valid for seven days. 

Polite waiting room etiquette

Germans may not be well known for being super friendly. But there are a few unexpected spots which are very welcoming. And one of those places is the doctor’s waiting room. 

Yes, it can be very surprising for foreigners when they are greeted with a little “Guten Morgen!” or “hallo!” in the waiting room when someone arrives. It’s customary for patients to give a polite hello and goodbye in the waiting room.

A person being vaccinated against Covid-19 in Hamburg in 2021.

A person being vaccinated against Covid-19 in Hamburg in 2021. Photo: picture alliance/dpa | Christian Charisius

… But you may face a stern receptionist or doctor

Ask a group of international residents about their experience of going to the doctor in Germany – or indeed other German-speaking countries – and you will likely hear about how the bedside manner is “different”.

This is because some doctors, and even receptionists, have a stern and direct approach when dealing with patients, which can be intimidating for newcomers to the country.

It can also be a little weird if you have to take some clothes off for an examination. You probably won’t be handed a gown, towel or even asked to undress behind a curtain. Everything is out in the open in Germany!  

Don’t worry though – none of this is personal. It’s just a different way of doing things. 

If you do come across a grumpy doctor, the best way to handle it is to either accept it or find a different doctor.

Be prepared to wait

Most Hausarzt (GP) practices in Germany operate on a drop-in basis during set times, known as Sprechstunden (consultation hours).

This means you can simply pop in during a two or three-hour window. During these times, it’s also first-come, first-served.

The advantage of this system is that it’s possible to see a doctor, for example, on a Wednesday morning without an appointment, as long as you have time to wait.

But if you are in a rush, or have a strict schedule, then the drop-in approach can be time-consuming. Depending on when you arrive, it could mean a short wait of several minutes or up to an hour.

The best advice is to arrive just as the doors open to secure a place near the top of the queue.

You can also book an appointment or Termin. But even if you book, you’ll probably still face a wait of at least 15 minutes. 

You are usually referred to a specialist

In Germany, if you are covered by public health insurance, you usually have to visit a GP to be referred to a specialist doctor.

There are exceptions in some cases, such as for gynaecologists and ophthalmologists where you can make an appointment without a referral.

If you have private insurance you can book appointments with specialists more easily.

READ ALSO: How to get a faster appointment with a specialist in Germany

Visit (or call) a GP for a sick note

If you’re sick from work then you have to get a sick note – Arbeitsunfähigkeitsbescheinigung or Krankschreibung – after three days of illness to give to your employer. Some bosses may require this sick note earlier, so check your contract or ask HR. 

Generally, you have to visit your doctor to get this document. But during the pandemic, people have been able to get a sick note over the phone from their GP for mild respiratory illnesses, including Covid-19. 

READ ALSO: The 10 rules you need to know if you fall ill in Germany 

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