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Why rent prices in major German cities are starting to fall

After a long period of soaring rents in Germany, rental costs have started to taper off - and even decline - in major cities across the country. Experts believe that tenants in the priciest cities have reached their financial breaking point.

A new-build development in Frankfurt am Main.
A new-build development in Frankfurt am Main. Photo: picture alliance/dpa | Frank Rumpenhorst

A recent study by housing search portal Immowelt found that rents have remained stable in some of the largest and most expensive cities in the country as new tenants struggle to afford what’s on the market. 

In Munich, Hamburg, Frankfurt and Stuttgart – which often top the charts as some of the priciest places to live in Germany – rents have stagnated over summer and autumn, lifting hopes that the period of ever-rising rents could be gradually coming to an end.

At present, average asking prices for an existing flat (rather than a new build) stand at €16.50 per square metre in Munich and €10.98 per square metre in Hamburg – though the prices for new builds tend to be higher.

In Frankfurt – Germany’s second most expensive city – tenants have even enjoyed a slight decline in rent prices over the same period.

While in the second quarter of 2021, Frankfurt residents would have been expected to pay asking rents of €11.72 per square metre for a rental property, by the third quarter, this had sunk by one percent to €11.60 per square metre. 

In Stuttgart, the third most expensive city, rents have also dropped by one percent to €11.07 per square metre.

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‘Price curves flattening out’

For its quarterly Mietkompass survey, Immowelt looked at the prices of exisiting properties listed on its portal to determine average prices for new tenants. Each of the properties were three-bedroom, 80-square-metre, second-floor flats. 

Out of 14 major cities surveyed, only five of them saw rent prices go up between the second and third quarter of the year, compared to eight cities in study conducted earlier this year.

In six of the cities, the rents stagnated, while in three of them, they went down. 

A map showing rising and falling rents in Germany
Map showing the development in rental costs between the second and third quarter of 2021 in Germany. Source: Immowelt

“This means that the price curves are flattening out in more and more cities,” the authors of the study explained. 

There was, however, one notable exception to the rule: in Berlin, where rents have been rising at a dizzying pace, new tenants had to shoulder yet another increase.

READ ALSO: Berlin’s super election day: What does it mean for the city’s housing shortage?

While at the start of the year, average asking rents stood at €9.06 per square metre, new tenants currently have to pay an average of €9.36 per square metres for a flat. Between the second and third quarter alone, asking rents snuck up by two percent, Immowelt found.

According to the researchers, this can partly put down to a rebound effect after the city’s rental cap was ruled unconstitutional in April.

However, even before the rent cap was thrown out by the courts, Germany’s capital remained the city with the fastest rising rents in the country. 

On September 26th, Berliners voted ‘yes’ in a referendum calling for the properties of major landlords to be brought into state hands. However, it is still unclear whether the advisory referendum will be enforced by politicians and whether it will overcome any legal challenges it may face.

In addition to Berlin, rents also went up slightly in Cologne, Hannover, Düsseldorf and Leipzig. 

Dresden, Nuremberg, Bremen and Essen all remained the same.

Rents no longer affordable for many

In the view of Jan-Carl Mehles, Immowelt’s Group Leader for Market Research and PR, stagnating rents in the most expensive cities can be seen as a sign that tenants are already financially overstretched.

“More and more major cities now have stable asking rents,” he said. “After some drastic increases, we’re now observing some subtle price corrections.

“In addition to market relief, for example through subsidised new developments, simple market mechanisms are also dampening price growth – the limits of affordability have been reached in some places.”

Protesters in Berlin call for a national rent cap
Protesters from the ‘Mietenstopp’ campaign gather with a banner calling for a national rent cap in Germany. Photo: picture alliance/dpa | Jonas Walzberg

According to the authors of the study, with a large proportion of people struggling to afford rents in major cities, making further price hikes unsustainable. 

“One reason for the unchanged prices could be that even higher rents can no longer be enforced on the market,” they wrote. “Many tenants are already having major problems affording an apartment in these cities.”

This means that most renters in Germany can look forward to a period of relative calm after several years of rent hikes.

In Berlin, however, where the market is still catching up to where it was before the rent cap, tenants look set for at least another six months of increases, Immowelt claims.

“Before the introduction of the rent cap, rents for existing apartments  were on the verge of breaking the €10 barrier,” said Mehles. “Despite a recent uptick in rents, the current price level is still some way off this.

“However, we assume that there will be further price increases and that by the beginning of next year rents will already be above the level they were before the rent cap.”

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RENTING

Everything you should know about renting a furnished flat in Germany

Furnished properties are increasingly popular in Germany - but it's worth knowing the rules around them to make sure you don't get overcharged. Here's everything you need to know before signing the contract on a furnished flat.

Everything you should know about renting a furnished flat in Germany

For someone moving to a new country or city, it seems like a dream scenario: you find a new place, pick up the key, and simply move in and unpack. Everything you need, from your bed to your coffee table, is already there waiting for you. 

You can dispense with the endless trawls through IKEA showrooms and trips across town to pick up second-hand furniture on Ebay Kleinanzeigen – not to mention the stress of endless decisions on colour schemes and measurements. 

It’s exactly this that makes furnished flats such a popular choice with foreigners. While they may not be a long-term option, the ease and flexibility of being able to move-in straight away makes them a great short- or medium-term option while you’re finding your feet in a city.

So, what’s the catch? 

A search for furnished flats on any rental property portal will reveal all. 

For around 30 square metres in Hamburg – the size of a large hotel room – it’s not unusual to see prices of around €2,700 or more per month, which amounts to a pretty hefty €90 per square metre. In Berlin, €3,000 per month may well be the price you pay for a tiny studio in a central location: €100 per square metre.

In the banking hub of Frankfurt, things are marginally more affordable. Here, a 30-square-metre furnished flat will set you back around €1,500. But that’s still a pretty steep €50 per square metre. 

Listings like these can give the impression that landlords are allowed to charge whatever they please for a furnished property. Thankfully, that’s not true – though the rules can get a little bit murky, especially when it comes to short-term lets.

READ ALSO: Six confusing things about renting a flat in Germany

Here’s a few other things you need to know. 

What is a furnished flat?

If a flat is rented as a furnished flat, it should have at least the bare essentials that are required to live in it. Generally, that would mean a bed, wardrobe, table, chairs and sofa, etc. 

However, you can occasionally find furnished flats that are “löffelfertig” (spoon-ready), which as the name suggests means they have everything you need, right down to cutlery and crockery. 

Why are furnished flats more expensive?

Generally speaking, landlords are entitled to compensation for the furniture they buy for the property, which can push the monthly rent up by as much as a few hundred euros per month. 

Since they don’t have to be clear about these costs and how different parts of the rent are calculated, some landlords may inflate the base rent as well, meaning that tenants may end up paying way over the odds. 

It’s also worth knowing that if properties are specifically defined as either holiday or short-term lets, landlords are exempt from many of the usual rent controls. 

Furnished holiday flat Germany

A modern furnished flat in Mecklenburg Western-Pomerania. Photo: picture alliance/dpa/Bades Huk | BRITA SOENNICHSEN

If the furnished flat is considered to be a holiday let, then the tenant is often required to pay tourist tax for each night they stay there. In this case, the flat also doesn’t have to be furnished to a particularly high standard as it is only intended to be lived in for a very short time. You may find this type of flat absurdly pricey compared to normal rentals in the city, and if money is a concern it’s best to steer clear of holiday lets for longer-term stays. 

If you work in the city and are staying somewhere for more than two months, the landlord may decide to class the property as a temporary let. In this case, the landlord is exempted from clauses like the Mietpreisbremse (rent brake), which are designed to slow down the rate of rent increases, and you should have a clear duration or move-out date specified in your contract.  

It’s important to note that the landlord will usually have to give a good reason for restricting the time period of the rental. This could be the fact that they or their family want to use it themselves or are planning renovations at a later date. 

READ ALSO: Altbau vs Neubau: What’s the difference and which should I rent in Germany?

How much more can my landlord charge?

As mentioned above, holiday and temporary flats can often be rented out for eye-watering prices – but there are strict rules on categorising a rental flat as temporary or holiday accommodation.

For an ordinary furnished rental, the rent should usually be roughly based on standard prices for similar properties in the same area (a system known as the Mietspiegel), with any premium features or fixtures adding slightly more to the monthly rent. As mentioned above, the landlord can also charge a surplus for the furnishings they include in the flat.

The broad rule of thumb here is that this should be linked to the value of the furniture and its depreciation in value of the course of time. Though landlords aren’t forced to be transparent about the system they use, the two most commonly used ones are the Hamburg and the Berlin model. 

Furnished flat

A cosy bedroom in a furnished flat. Photo: picture alliance/dpa/VDM | Rauch

With the Berlin model, the landlord is allowed to charge two percent of the total value of the furniture each month.

The furniture is assumed to have a lifespan of 10 years, so if the furniture is new when the tenant moves in, they can charge two percent of the purchase price of the furniture each month. If all the furniture in a flat cost the landlord €5,000, that would amount to €100 extra in rent each month. The value of the furniture goes down by ten percent per year, so after five years the landlord would charge €50 per month on top of rent, and after ten there would be no surcharge.

The Hamburg model assumes that furniture goes down in value over the course of seven years, after which time it’s worth just 30 percent of its purchase price. The amount that the tenant pays towards the cost of the furnishings each year is based on these calculations.

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Can I take furniture out of a furnished flat?

Yes! If you’re someone who likes to put your own stamp on a place, then you’re fully entitled to replace some of the furniture with your own.

But – and this is a big ‘but’ – you’ll be responsible for storing the furniture safely until you move out, and putting everything back in its previous place.

In other words, we don’t recommend chucking the coffee table out on the street with a ‘Zu verschenken’ label before moving in your own piece. We guarantee your landlord will not be amused once they find out. 

To clarify what’s meant to be in the flat when you move in (and when you move out), tenancy law experts recommend having a full inventory in the contract. That should help you avoid any nasty disputes in the future.

What if the furniture is damaged, missing or defective? 

If furniture is damaged, missing or unusable, you’re entitled to have it repaired or replaced and can also ask for a rent reduction.

Once again, it’s useful to have a full inventory of what should be in the flat to help you with these negotiations.

Do tenants in furnished flats have the same rights as other tenants?

Generally, yes. Having furnishings inside a property doesn’t change the legal status of the contract.

That means that your landlord can’t, for example, suddenly ask you to move out at short notice and without any cause. As mentioned, they also need to have a specific reason for limiting the duration of your contract – otherwise the move-out date isn’t valid. 

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