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EXPLAINED: How property prices are dropping in major German cities

Germany's property market is becoming a friendlier place for buyers as prices continue to drop in major cities - but renters are still feeling the squeeze.

Residential properties in Berlin Spandau.
Residential properties in Berlin Spandau. Photo: picture alliance/dpa | Wolfgang Kumm

What’s going on? 

The current economic situation appears to have had an effect on Germany’s housing market in recent months: demand for properties has been tailing off amid interest rate hikes and the cost of living crisis. 

According to a recent study by property search portal ImmoScout24, the number of people buying houses in Germany fell dramatically in the second quarter of 2022. 

In many of the major metropoles, property prices also went down as people struggled to find interested buyers. In particular, properties for sale in Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart fell in asking price by as much as 6.6 percent.

READ ALSO: How Germany’s property boom could be slowing down

With the exception of Berlin, a single-family house cost significantly less by the end of June in almost all German cities surveyed by the portal. 

In Cologne, for example, prices fell by four percent within three months, while in the pricy city of Stuttgart they dropped by 6.6 percent.

Prices for existing (rather than new-build) flats stagnated in Munich, Stuttgart and Hamburg, while they continued to rise in Berlin, Düsseldorf and Cologne.

Outside of the cities, the nationwide trend in property prices – i.e. including smaller towns and the countryside – still pointed slightly upwards overall.

But the price increases, which averaged two percent compared to the previous quarter, were nowhere near as high as they have been in recent years. 

Is this part of a longer term trend? 

It seems like it could be the beginning of the end of spiralling house prices in the Bundesrepublik.

Explaining the latest figures, ImmoScout24 managing director Thomas Schroeter said the property market in Germany was currently undergoing a price correction after years of inflated prices. 

This can be attributed to a perfect storm of factors that includes high construction costs, high inflation and significantly higher interest rates, which make borrowing for a mortgage more expensive. 

“The real estate market is in a phase of adjustment to the new economic reality, which in the buyer’s market is characterised above all by the new interest rate level,” Schroeter said. “For the first time since the financial crisis in 2008, we are seeing significant price corrections, especially for new-build flats and single-family homes in existing and new buildings.”

This is largely to do with the major drop in demand for houses: the number of buyers on the real estate portal has fallen by 36 percent compared to last year, while the number of advertised offers has increased by 46 percent.

“It is currently much more difficult for sellers to find buyers for their property offers,” Schroeter explained. 

Meanwhile, advertisements for properties are also remaining online for longer than they previously did.

READ ALSO: EXPLAINED: What you need to know about buying property in Germany

Is this good news for buyers?

That all depends on how much money they have to spare – and how much they need to borrow. 

Buyers with capital will certain benefit from the lower prices and the fact that sellers seem to be a lot more willing to negotiate on the price at the moment. 

On the other hand, the current interest rates on mortgages – which are now over three percent – are making it hard for those who need to borrow money to make it onto the housing ladder.

“The monthly instalments have doubled in price compared to last year’s low interest rates for a typical financing model,” Schroeter explained. 

Rampische Straße in Dresden Old Town

Rampische Straße in Dresden Old Town. Photo: picture alliance/dpa | Robert Michael

What are the cheapest and most expensive cities?

It may seem unbelievable for those who live in the capital, but Berlin, along with Cologne, are the cheapest German metropoles to buy property in.

In Cologne, buyers pay an average of €4,626 per square metre for an existing flat and around €4,933 per square meter for a house. In Berlin, a flat will set you back an average of €4,675 per square metre and a house costs around €5,094 per square metre.

Munich remains by far the most expensive city, with flats in the Bavarian capital costing €7,870 per square metre and houses costing €8,542 per square metre. The next most expensive cities were Frankfurt and Stuttgart, followed by Hamburg and Düsseldorf.

However, the cheapest option for getting on the housing ladder in Germany is to buy outside of the major cities. While houses in most metropoles will set you back more than €5,000 per square metre, the national average is just €3,041 per square metre. 

READ ALSO: Where in Germany can you still snag a home for under €100k?

What’s going on in the rental market?

Thanks to the fact that buying is increasingly out of the average person’s price range, rents are currently getting hiked up all over Germany. 

According to Immoscout24, there was a 48 percent increase in demand for rental apartments in the second quarter of 2022, and the platform’s WohnBarometer shows that the asking prices for rental flats across Germany are climbing at the steepest rate in years.

According to the survey, existing flats for new rentals were on average 2.7 percent more expensive than at the beginning of the year. For newly built flats, rents went up by 3.6 percent.

The national average for asking rents for existing flats was €7.66 per square metre and €10.59 per square metre for new-build flats. 

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EXPLAINED: The German cities where rents are rising fastest this year

People searching for a flat in German cities including Hamburg, Cologne and Berlin are in for a nasty surprise as rents are going up significantly, according to a recent study.

EXPLAINED: The German cities where rents are rising fastest this year

Real estate platform ImmoScout24’s recent ‘WohnBarometer’ shows the development of asking rents for the second quarter of 2022 in Germany as a whole, and the seven largest city areas.

Asking rents in new lettings for existing flats rose above €12 per square metre for the first time in Hamburg, and above €11 per square metre in Berlin.

In Berlin, Frankfurt am Main and Stuttgart, asking rents for new-build flats have risen above €15 per square metre.

What’s the picture across Germany?

For the second quarter of 2022, the WohnBarometer shows that the asking prices for rental flats across Germany have risen significantly more than in previous quarters.

On average, the asking price for existing flats was 2.7 percent more expensive to let than in the previous quarter. Newly built flats were on average 1.8 percent higher than in the previous quarter.

The average asking rent for existing flats in the second quarter was €7.66 per square metre. New-builds were offered for an average of €10.59 per square metre.

Meanwhile, demand for rental apartments shot upwards by 48 percent in the second quarter of 2022.

READ ALSO: Single people and large families ‘pay more for rent in Germany’ 

Where is the situation particularly bad for existing rentals?

Those eyeing up big cities as a place they want to settle in face a particularly hard time. 

Hamburg recorded the highest price dynamics in the area of existing rental flats older than two years in the second quarter – but it remains in fourth place in the rental price comparison of the seven largest German cities.

On average, the rent level in the Hanseatic city was €12.22 per square metre in the second quarter of this year. A rental flat with 70 square metres costs an average of €855.40 per month ‘cold’ – before other costs – Nebenkosten – are added on.

Flats in Hamburg's Eimsbüttel area.

Flats in Hamburg’s Eimsbüttel area. Photo: picture alliance/dpa | Daniel Bockwoldt

The real estate portal expects rents for existing properties in Hamburg to rise by nine percent this year alone. That would be two percentage points more than the inflation rate expected by the Bundesbank for 2022.

And in a city with a home ownership rate of 21 percent, this affects many of the 1.85 million residents.

From the first to the second quarter of 2022, asking rents in flat ads in Hamburg have risen by five percent. 

This is by far the highest value in Germany’s seven largest cities. Cologne achieved the second highest increase with 3.7 percent, while rents in Stuttgart fell by 0.7 percent.

In Berlin, asking rents for existing flats rose by just 1.4 percent, but broke the €11 per-square-metre mark.

Berlin nevertheless remains one of the cheapest of the large cities in Germany. Only Düsseldorf, at €10.81 per square metre on average, is lower. Cologne is the third least expensive place to rent with an average of €11.58 per square metre, according to asking prices for existing properties.

The graph shows the average costs per square metre for existing properties.

The graph shows the average costs per square metre for existing properties. Screenshot: ImmoScout24

Munich remains the most expensive city for renting with an average price per square metre of €16.93 per square metre. With a decrease of 0.7 percent for existing rental flats to €12.26 per square metre, Stuttgart was the only city to record a slight price decline in rents compared to the first quarter.

What about new build flats?

In the second quarter of 2022, Berlin recorded the largest price increase among the cities for new flats for rent, with an increase of 4.5 percent. These were offered in new lettings on ImmoScout for an average of €15.37 per square metre, exceeding the threshold of €15 per square metre.

In the German capital, the average monthly ‘cold rent’ for a new flat with 70 square metres is €1,075.90. Berlin is now above the level of Düsseldorf, Hamburg, Frankfurt am Main and Stuttgart.

But Frankfurt and Stuttgart also cracked the €15 threshold for the first time in the second quarter. In the financial capital, the rent level rose by 2.6 percent from the first to the second quarter to €15.17. Stuttgart is just above this at €15.24 per square metre.

In Munich, asking rents for new flats increased by 3.1 percent. With an average asking rent of €19.64 per square metre, Munich remains the most expensive city in Germany. In Cologne, asking rents for newly built rental flats rose only moderately, by 1.7 percent to €12.88 per square metre.

Graph shows the average costs per square metre for new build flats in cities.

Graph shows the average costs per square metre for new build flats in cities. Screenshot: ImmoScout24

How is demand affecting the situation?

Experts say the dynamics are changing on the rental and property markets in Germany.

“Demand continues to be significantly higher than the available supply,” said Thomas Schroeter, managing director of ImmoScout24.

“Due to the rise in interest rates, demand has shifted from buying properties to renting. As a result, rent-seekers now face even more competition when looking for a flat.”

READ ALSO: How property prices are dropping in major German cities

Immoscout24 registered the highest demand for rental flats in Berlin, with a whopping 217 enquiries on average per flat advertisement per week. In Cologne, the demand was 78 enquiries per ad, and in Hamburg, the real estate site registered 68 enquiries per ad on average.

What will happen in future?

It doesn’t look like the situation will ease off this year. Experts predict that by the end of 2022 in Hamburg, for instance, the price increase for existing flats will be nine percent – the highest in Germany.

In Berlin, by the end of the year, rents for existing apartments are expected to rise by 5 percent overall, and in Cologne and Stuttgart, 6 percent. 


Existing apartments/flats – (die) Bestandswohnungen

Asking price – (der) Angebotspreis

New build/new construction – (der) Neubau

Basic rent or ‘cold rent’ – (die) Kaltmiete

Rent including other costs – (die) Warmmiete

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