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EXPLAINED: Where rents are falling (and going up) in Germany's biggest cities

The Local Germany
The Local Germany - [email protected]
EXPLAINED: Where rents are falling (and going up) in Germany's biggest cities
Flats in Berlin-Mitte, viewed from the Berlin TV Tower in August 2020. Photo: picture alliance/dpa | Christoph Soeder

In eight out of 14 major cities in Germany, rents are stagnating or falling, a new survey has found. But in Berlin rents have gone up by two percent since the rent cap was lifted.

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Rents in the most expensive German cities - Munich, Frankfurt and Stuttgart - are stagnating or falling, according to real estate firm Immowelt's Mietkompass (rent compass) for the 2nd quarter of 2021.

However, there are increasing prices in some affordable cities: rent costs for Essen and Bremen have each gone up by two percent on average. 

For the study, square metre prices of existing flats offered on immowelt.de in the 2nd quarter of 2021 were compared with the previous quarter.

EXPLAINED: Munich's radical new approach to solving the housing crisis

Renting is a huge topic in Germany. The country has the lowest level of property ownership in the EU, with just over half of the population owning their own home and the rest opting to rent. 

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Rents go up in Berlin after Mietendeckel fail - and in Cologne

It's been a turbulent few months in Berlin. In April, the federal constitutional court declared Berlin's rent cap, which had been brought up in February 2020, null and void. 

Tens of thousands of tenants in Berlin saw their rents hiked up by hundreds of euros each month, while some were hit with bills for backdated rents – in many cases amounting to thousands of euros.

READ ALSO: ‘Stressed and depressed’: How Berlin’s rent cap fiasco has affected foreign tenants

In the second quarter of 2021, the price curve of Berlin flats is - perhaps not surprisingly, pointing upwards again, said Immowelt. Asking rents in Berlin have so far risen by 2 percent to €9.26 per square metre. In the first quarter, that number was €9.06.

Since many landlords included so-called 'shadow rents' in their contracts while the rent cap was in force so tenants would pay a higher cost if the Mietendeckel was thrown out in court, asking prices have adjusted upwards again fairly quickly. 

However, Jan-Carl Mehles, group leader for market research at Immowelt, said the Berlin rise has been "comparatively moderate" so far "considering that there have been no price jumps in the past 1.5 years".

He added: "Nevertheless, we assume that there will be further catch-up effects in the coming months and that rents will rise significantly."

Adding more fuel to the housing battle in the capital, Berliners are to vote later this year on whether to force major property companies to sell thousands of their flats to the city. 

Just as in Berlin, the Immowelt Mietkompass also records an increase of two percent in asking rents in Cologne compared to the previous quarter.

A map showing the average cost and changes in rent in the second quarter of 2021 compared to the first quarter according to the Immowelt analysis. Source: Immowelt

However, the price level in the Rhine metropolis is clearly higher. Tenants should expect to pay around €10.51 per square metre in flats. Prices in Hamburg also continued to rise slightly: plus one per cent in the past three months. The average square metre in the Hanseatic city costs €10.91.

A breather in Munich, Frankfurt and Stuttgart

In the most expensive German cities, however, tenants can breathe a little easier.

In Munich, rents are stagnating - but they are still at an outrageously high level. Existing flats in the Bavarian capital cost around €16.54 per square metre, almost €5 more than in Germany's second most expensive city, Frankfurt am Main.

READ MORE: Housing: How did it get so expensive to live in Munich? 

In the banking metropolis, rents are actually declining slightly. While in the first quarter, tenants had to pay €11.95 per square metre, it is currently €11.66 - a drop of two percent and, next to Hanover (also minus two percent), the strongest decline of all cities.

The picture is similar in Stuttgart and Düsseldorf. In both cities, asking rents have fallen slightly by one percent.

In general, a limit on prices now seems to have been reached in the most expensive cities.

Housing in Frankfurt, which has seen a slight decrease rent costs, according to a study. Photo: picture alliance/dpa | Sebastian Gollnow

Many households are already heavily burdened by housing costs: an Immowelt analysis showed that a household in Munich would have to earn just under €6,000 a month to achieve a healthy housing cost ratio of 30 percent. In Frankfurt, a household requires €4,500, in Stuttgart €4,200.

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Rent going up in affordable big cities

While rents are stagnating in many of the more expensive cities, increases can still be seen in the inexpensive large cities. In Essen and Bremen, for example, the price trend is upwards (both plus two per cent). But with asking rents of just €7.61 per square metre in Essen and €8.08 in Bremen, the price level remains moderate.

Leipzig, the cheapest place to live of all the cities surveyed, recorded an increase of one percent in housing costs. Tenants have to pay around €6.51 per square metre - around €10 less than in Munich, the report found.

In neighbouring Dresden, where rents are stagnating, tenants currently pay €6.78 per square metre on average. The low price level in the eastern German cities is related to the comparatively large vacancy rate compared to western regions. But both cities continue to enjoy high popularity, especially among young adults. Rents could consequently rise more strongly in the coming years. 

How did the study come about?

Immowelt's quarterly report looks at rental prices for flats in the major German cities that have more than 500,000 residents. 

The analysis is based on flats advertised on immowelt.de and aims to provide a snapshot of the German rental market and how it is developing.

READ ALSO: German housing co-ops: What are they and how do I sign up?

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