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Hamburg has emerged as Germany's unexpected rental market leader, with new build rents jumping 13% in the first half of 2025 to reach €22.40 per square metre. The surge propels the Hanseatic city above both Frankfurt am Main and Berlin, making it the country's second-most expensive rental market after Munich.
The Hamburg growth reflects broader shifts reshaping German rental markets. After years where new construction commanded the highest rent increases, existing housing stock is now outpacing new builds in major metropolitan areas. JLL data shows existing rents rising 6.8% compared to just 3.3% for new construction—a complete reversal from previous patterns.
"The momentum is enormous in the short term," said Christoph Meszelinsky, Managing Director at BNP Paribas Real Estate. Hamburg's 72% rent growth since 2015 now matches Berlin's trajectory, though the capital's market shows signs of cooling after years of explosive increases.
The pattern shift extends beyond Hamburg. BNP Paribas Real Estate found asking rents for new builds rose 8% across German cities in the first half of 2025, double the long-term annual average of 4.4% since 2015. But existing properties posted their own strong gains, with rents up 4% in A-cities during the same period.
Regional winners and losers emerge
Munich maintains its position at the market apex, commanding approximately €23 per square metre for new builds according to multiple sources. Frankfurt demonstrated continued strength with 6% asking rent growth in the first half, while Berlin's meteoric rise appears to be stalling.
The Kiel Institute's GREIX index provides detailed city-by-city breakdowns for Q2 2025. Düsseldorf posted 1.5% quarterly growth to reach €14.25 per square metre, while Stuttgart saw moderate increases of just 0.2% to €15.99 per square metre. Leipzig remains notably cheaper at €10.10 per square metre but recorded steady 0.3% quarterly growth.
"Compared to 2024 and the beginning of 2025, when rental prices surged strongly, the current price trend is much more moderate," explains Jonas Zdrzalek, real estate expert at the Kiel Institute. Overall asking rents rose 0.7% quarter-over-quarter in Q2 2025, translating to 3.4% annual growth.
Yet market intensity remains high. Average listing duration has dropped to just 23 days in 2025, down from 34 days in 2015. In Berlin, one in four apartments disappears from the market within two days. Vacancy rates reflect the shortage: Munich and Frankfurt am Main both recorded just 0.1% vacancy in the first half of 2025.
Outside major metropolitan areas, rental growth varies significantly. University city Münster saw particularly strong increases of 3.5% quarterly to €13.87 per square metre. East German cities experienced moderate growth: Erfurt up 1.3% to €9.43 per square metre and Dresden rising 1.1% to €9.89 per square metre.
Construction crisis deepens supply shortage
The rental surge stems from Germany's worsening construction crisis. Completed homes fell to 252,000 in 2024, down 17% from previous years. Industry forecasts predict further declines to around 220,000 completions in 2025, according to André Adami from researchers bulwiengesa.
With construction projects taking 24-30 months to complete, any recovery in building activity will not impact rental markets until 2027-2028. The nationwide vacancy rate sits at 2.5%, well below the 3% level considered necessary for healthy market function.
"The shortage of apartments is meeting with continued strong demand," Adami noted. Population growth in major cities compounds the problem, with latest forecasts showing continued expansion in A-cities over coming years.
The supply constraints explain why existing stock is now seeing stronger growth than new builds in metropolitan areas. With so few new apartments available, tenants compete more intensively for existing properties when leases turn over, pushing up rents across all housing segments.
For independent cities outside major metropolitan areas, BNP Paribas found new build rents have climbed 55% since 2015 to an average of €14.65 per square metre. Existing properties rose 49% to €10.35 per square metre over the same period, showing rental growth has spread well beyond Germany's largest cities.
"Dynamic rental growth is expected to continue, especially in new construction," said Meszelinsky. The combination of sustained population growth, minimal construction activity, and extremely low vacancy rates creates a structural supply deficit that will persist for years.
With construction lead times of 24-30 months, even a rapid policy response would not deliver relief until 2027-2028. This timeline suggests rental markets will remain seller's markets, with landlords retaining significant pricing power across most German regions. For institutional investors, the fundamentals point to continued income growth, though affordability constraints may eventually limit increases in some secondary markets.