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A cluster of modern apartment buildings in Berlin, Germany
Germany’s rental market is under immense pressure as we head into 2025, according to Dr. Gesa Crockford, Managing Director of ImmoScout24, Germany's largest property portal. With demand for rental apartments having doubled nationwide over the past five years, the widening imbalance between supply and demand is driving rents higher and reshaping housing trends across both urban centres and rural regions.
ImmoScout24
Dr. Gesa Crockford, Managing Director, ImmoScout24
“The rental market is going crazy,” says Crockford, in a wide-ranging and insightful interview in business daily Handelsblatt. In Germany’s largest cities—Berlin, Hamburg, Munich, and Frankfurt—the pressure is most acute, but affordability constraints in urban centres are pushing tenants to commuter belts and rural regions. Search volumes for rental properties in these areas have jumped by 30% since 2022, as families and professionals seek cheaper alternatives.
However, rents in outlying commuter belts are growing faster than urban centres. “In places like Brandenburg or Lower Saxony’s commuter zones, we’re seeing double-digit rent increases,” Crockford explains. “These areas offer relief, but costs are catching up fast.” While rents in Berlin rose 6.2% on average in 2024, some nearby commuter towns experienced hikes of over 12%, driven by migration trends and limited supply.
Newly built properties, where rent controls are lighter, have seen asking rents climb by as much as 70% over the past five years. Crockford expects this upward trajectory to continue in 2025. “People looking for a rental property will have a hard time in 2025. There is simply a shortage of apartments,” she observes, adding that average tenants now spend more than a year searching for a suitable flat.
Home purchase prices on the rise
While the rental market remains strained, Crockford forecasts a modest recovery in residential purchase prices, predicting a 5% rise over the coming year. Stabilised interest rates and shrinking property inventories are bringing buyers back to the market. “The supply overhang that still prevailed in 2023 is shrinking,” she notes.
However, the recovery remains uneven. Premium locations in major cities are seeing the strongest gains, while rural areas outside commuter belts lag behind. For buyers, there is still room to negotiate, with discounts of up to 11% available, particularly from private sellers in weaker regions. “It’s always worth negotiating,” Crockford advises.
Crockford warns that the housing crisis could create significant social strain, particularly as affordability becomes a widespread issue. “It is no longer only the economically disadvantaged who have problems finding housing. Many young families and even well-paid professionals are reaching their limits.”
A recent ImmoScout24 analysis shows that in Germany’s largest cities, tenants are now spending an average of 35-40% of their net household income on rent—well above the recommended 30% threshold for affordability. In commuter belts, this figure remains closer to 28%, though rising rents risk eroding the gap.
Scrapping rental caps has been floated as a solution to restore market equilibrium, with proponents arguing it would incentivise investment and increase supply. However, Crockford dismisses the likelihood of full deregulation gaining political support. “Economically, deregulation makes sense, but politically it’s a non-starter,” she explains.
Instead, Crockford advocates for targeted reforms: subsidies to incentivise affordable housing construction, tax breaks for private and institutional investors, streamlined permitting processes, and better financing options for energy-efficient developments. “We need an environment where it’s feasible to build without compromising quality or sustainability,” she adds.
The bottleneck in new construction remains a central issue. The previous government’s failure to meet its 400,000-unit annual target highlights broader systemic challenges. “Building in Germany needs to be simplified; the standards are too high,” Crockford states, calling for bold but realistic solutions to boost supply while ensuring projects remain financially viable.
Shifting dynamics between renting and buying
Rising rents are prompting more tenants to reconsider home ownership. Search volumes for properties to buy have climbed above pre-2022 levels, reflecting renewed interest from buyers who had previously been sidelined by higher interest rates.
However, affordability remains a hurdle. While interest rates have stabilised, tighter lending criteria and higher deposit requirements persist. For those able to buy, opportunities are strongest in urban centres with stabilised prices and strong long-term demand.
Crockford also stresses the importance of timing and preparation for both renters and buyers. For renters, Sundays see the highest number of new listings as landlords prepare for the week ahead. “Landlords typically list on Sunday mornings when they’ve had time to prepare new properties. Checking early can give tenants a decisive edge,” she explains. For buyers, readiness includes securing financing and acting quickly when opportunities arise. “Good timing is everything,” Crockford says. “Interest rates are stable, and prices are starting to rise again. If you’ve found the right property, now is the time to act.”
Concrete solutions needed - implications for investors and policymakers
Germany’s housing crisis requires immediate and coordinated action, Crockford believes. She calls for reforms to encourage construction, including tax incentives for developers, reduced red tape for new projects, and better financing options for energy-efficient housing. Regional strategies must also address housing shortages in commuter belts alongside urban centres to ease the pressure on both markets.
The implications for investors are clear: those who act early in under-supplied commuter zones or focus on energy-efficient developments will be best positioned to capitalise on the growing demand. Meanwhile, policymakers face increasing pressure to act decisively or risk deepening the affordability crisis.
“The housing market moves slowly—like shifting the course of a large vessel—and meaningful change takes time to materialise,” Crockford concludes. Without targeted interventions, the imbalance between supply and demand will only deepen, exacerbating affordability issues and creating significant risks for both investors and society as a whole.
