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REAL ESTATE

EXPLAINED: What’s happening to house prices and rents in Germany amid the coronavirus crisis?

There's an increased demand on the real estate market in Germany at the moment, and there's drama looming for tenants in Berlin. Here's a look at what's going on.

EXPLAINED: What's happening to house prices and rents in Germany amid the coronavirus crisis?
Frankfurt am Main. Photo: DPA

Ever dream of owning your own home in Germany? Well, sadly, it has become more expensive since the beginning of the pandemic.

In the second quarter (April to June), condominiums were on average 1.3 percent more expensive than at the beginning of the year. Compared to the second quarter of 2019, the increase was 5.9 percent. That's according to Research and Consulting Company for Housing, Real Estate and the Environment (F+B), which Spiegel reported on Monday.

Surprisingly, the price increase for single and two-family houses was even higher than that of apartments. Compared to the previous quarter, the prices of houses increased by 2.9 percent – and even by nine percent year-on-year.

This is unusual because prices for condos in Germany have almost always risen much faster than those for houses over the past 10 years.

Experts said more people are choosing to buy homes in Germany.

“In view of historically unparalleled low lending rates, it seems to be more economical for many buyers to invest in owner-occupied properties instead of renting,” said F+B Managing Director Bernd Leutner.

READ ALSO: Housing in Germany – here's where demand and prices are soaring

It is not known for definite whether the sharp rise in the price of single-family homes is due to increased demand resulting from the coronavirus crisis, for example because families are looking for more space and gardens – but it could be a factor.

The F+B Residential Index measures the rent and price developments on the German real estate market. The index is based on the supply data of more than 30 million properties throughout Germany.

What's happening to rent?

Unlike homes, rents have hardly risen at all in the past two years. Even in the second quarter, there was only a minimal increase in new contract rents, researchers found. Compared to the previous quarter, rents rose by 0.4 percent and by one percent year-on-year.

Rents for existing properties rose by 1.3 per cent year-on-year. “On a national average, the increase in rents is therefore manageable,” said Leutner.

Berlin tenants face paying back millions of euros

There could be major problems looming for Berlin tenants

The controversial rent freeze came into force on February 23rd this year which resulted in lower rents for many tenants. But experts say it could be overturned at any moment, leaving tenants liable to pay pack the difference.

The core issue being debated in courts is whether the state of Berlin is allowed to legislate in this area.


Housing in Berlin. Photo: DPA

If the Constitutional Court overturns the rent cap, many tenants in Berlin will face paying back huge amounts, according to F+B.

Due to the still unclear legal situation, there is currently a split rental market in the city. There are “shadow rents”, i.e. “the market rents”, which are usually higher than the price of the rent cap.

And on the other hand, there's the “official” rent costs corresponding to the rental price cap. The research company analysed the advertised rental apartments before and after the law came into force and “observed the existence of two rent indications in one and the same apartment advertisement”.

READ ALSO: Berlin's district court rules in favour of rental price cap

This is often associated with the remark that “the landlord reserves the right to retroactively claim the difference between the rent cover rent and the market rent”. The tenant has to agree to this in the rental contract.

SEE ALSO: The complete guide to how you can (still) live cheaply in Berlin

According to F+B the difference is clear to see: for 3,133 apartments offered between February 23rd 2020 and June 30th, F+B assumes a capped average rent of €7.05 per square meter

However, the market rent for the apartments is an average of €13.63 per square metre – a difference of €6.58 per square metre. With an average apartment size of 60 square metres, this would mean a total difference of €1.2 million per month which tenants would have to cough up.

“The longer the decision drags on, the greater the threatening additional claims,” says F+B managing director Leutner. At the same time, the massive difference in costs shows the advantages of the new rent freeze for tenants.

In any case, a quick clarification would be in the interest of all parties involved, said the research firm.

READ ALSO: 'We're setting a clear stop sign': Berlin passes five-year rent freeze law

Despite receiving the support of Berlin's state parliament, the law is opposed by Germany's federal government which argues that regulating housing costs is a federal rather than a state matter.

 

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LIVING IN GERMANY

REVEALED: The most commonly asked questions about Germans and Germany

Ever wondered what the world is asking about Germany and the Germans? We looked at Google’s most searched results to find out – and help clear some of these queries up.

Oktoberfest
Hasan Salihamidzic, the sports director of FC Bayern, arrives with his wife at Oktoberfest in full traditional dress. Photo: picture alliance/dpa |

According to popular searches, Germany is the go-to place for good coffee and bread (although only if you like the hard kind) and the place to avoid if what you’re looking for is good food, good internet connection and low taxes. Of course, this is subjective; some people will travel long stretches to get a fresh, hot pretzel or a juicy Bratwurst, while others will take a hard pass.

When it comes to the question on the bad Internet – there is some truth to this. German is known for being behind other rich nations when it comes to connectivity. And from personal experience, the internet connection can seem a little medieval. The incoming German coalition government has, however, vowed to improve internet connectivity as part of their plans to modernise the country.

There are also frequent questions on learning the German language, and people pointing out that it is hard and complicated. This is probably due to the long compound words and its extensive grammar rules, however, as both English and German are Germanic languages with similar words in common, it’s not impossible to learn as an English-speaker.

Here’s a look at some of those questions…

Why is German called Deutsch? Whereas ‘German’ comes from the Latin, ‘Deutsch’ instead derives itself from the Indo-European root “þeudō”, meaning “people”. This slowly became “Deutsch” as we know it today. It can be a bit confusing to English-speakers, who are right to think it sounds a little more like “Dutch”, however the two languages do have the same roots which may explain it.

And why is Germany so boring? Again, probably a generalisation, especially given that Germany has a landmass of over 350,000 km² with areas ranging from high rise, industrial cities to traditional old town villages and even mountain ranges, so you’re sure to find a place that doesn’t bore you to tears.

Perhaps it is a question that comes from the stereotype that Germans are obsessed with strict about rules, organised and analytical. Or that they have no sense of humour – all of these things being not the most exciting traits. 

Either way, from my experience I can confirm that, even though there is truth to German society enjoying order and rules, the vast majority of people are not boring, and I’m sure if you come to Germany you’ll meet many interesting, funny and exciting people. 

READ ALSO: 12 mistakes foreigners make when moving to Germany

When it comes to the German weather, most people assume a cold and cloudy climate, however this isn’t entirely true. While the autumn and winter, especially in the north, comes with grey skies and sub-zero temperatures, Germany can have some beautiful summers, with temperatures frequently rising above 30C in some places.

Unsurprisingly, the power and wealth of the German nation is mentioned – Germany is the largest economy in Europe after all, with a GDP of 3.8 trillion dollars. This could be due to strong industry sectors in the country, including vehicle constructions (I was a little surprised to find no questions posed on German cars), chemical and electrical industry and engineering. There are also many strong economic cities in Germany, most notably Munich, Frankfurt am Main and Hamburg.

READ ALSO: Eight unique words and phrases that tell us something about Germany

Smart and tall?

Why are Germans so tall? They are indeed taller than many other nations, with the average German measuring a good 172.87cm (or 5 feet 8.06 inches), however this may be a question better posed to the Dutch, who make up the tallest people in the world.

Why are Germans so smart? While this is again a generalisation – as individuals have different levels of intelligence in all countries – this question may stem from Germany’s free higher education system or their seemingly efficient work ethic. Plus there does seem to be some scientific research behind this question, with a study done in 2006 finding that Germans had the highest IQ in Europe.

So, while many of the questions posed about Germany and Germans on Google stem from stereotypes, we can confirm that some aren’t entirely made up. If you’re looking to debunk some frequently asked questions about France and the French, check out this article by our sister site HERE.

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