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What will happen to rents in Germany in 2024?

The Local Germany
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What will happen to rents in Germany in 2024?

Property prices have plummeted in Germany since the outbreak of war in Ukraine. Is the rental market set to go a similar way - or will rents keep rising?

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People on low and middle incomes are being squeezed on both ends at the moment when it comes to housing. High interest rates are making it hard for buyers to get on the housing ladder while rising rents are making life hard for tenants. 

The lack of affordable housing is a major issue for foreigners in Germany, and despite the government pledging to build hundreds of thousands of new homes a year, the problem seems to be getting worse.

READ ALSO: What will happen to the German property market in 2024?

According to some of the latest stats, tenants are currently shelling out almost ten percent more in rent than they were last year.

In the eight biggest German cities, rents rose by an average of 8.4 percent between the third quarter of 2022 and the third quarter of 2023 - and experts believe the upward trend will continue.

In cities outside of the major metropoles, there was also a striking increase in rental costs. In Mannheim and Wuppertal, rents rose by 5.7 percent, in Bonn they rose by 4.8 percent, and in Essen they rose by 5.2 percent.

In contrast to property prices, which have plummeted since Russia's invasion of Ukraine, the rental market is seeing a seemingly unstoppable rise. 

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Will rents increase further in 2024?

Currently, experts predict that rents in German cities will continue to rise sharply - at least for the time being.

That's because demand for rental properties is growing, in part due to immigration, and supply remains low.

Though the German government promised to build at least 400,000 new homes a year, it has missed this target by a long shot in the first two years of its term. 

READ ALSO: 'Choose a smaller city': How to find the best place in Germany to move to

This year, the SPD-led coalition will finish an estimated 270,000 new homes, with 265,000 expected in 2024.

This is nowhere near enough to keep up with the current scale of demand. 

New-build flats in Hambur

New-build flats in Hamburg. Construction costs have skyrocketed lately to high interest rates. Photo: picture alliance/dpa | Daniel Bockwoldt

"We expect political uncertainty to remain high in 2024 and see little scope for stimulus in new residential construction," Roman Heidrich, expert for residential real estate valuations at the major real estate agent Jones Lang LaSalle (JLL), told Tagesschau.

On the positive side, renters outside of the major cities and in more rural areas have seen rents rise more slowly, by an average of four percent year-on-year.

However, Heidrich expects the trend of rising rents to last for years to come. 

"We assume that rents will continue to rise in the medium and long term, as demand in most regions of Germany will continue to significantly exceed the shrinking supply of new apartments in the coming years, he said.

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