Residential rents in Germany have been surging upwards as mortgage finance has nearly quadrupled this year, bringing the availability of properties to buy to a near standstill.
A new survey by the Cologne-based Institut der deutschen Wirtschaft (IW Köln) shows that rents increased in the third quarter by 5.8% year-on-year, above the three-year average for the quarter of 4.5%.
IW Köln's Dr. Michael Voigtländer said the upward trend was gathering momentum as demand for accomodation continues to rise, while potential buyers resolutely remained tenants and landlords were pushing through rent increases while inflation remains high. There was also considerable evidence that more rural regions were also seeing a belated catch-up effect.
The numbers in the survey should be treated with a certain caution, being based as they are on 1.5 million advertisements on the biggest property portals, rather than actually proven transactions. However, in contrast to purchase prices, residential rents in Germany are not generally subject to negotiation, and competition from tenants for available apartments has increased.
Rents seem to have risen the most in the fairly poor states of Mecklenburg-Vorpommern (10.3%), Brandenburg (9.1%) and Saarland (7.9%), while more prosperous Baden-Württemberg, Saxony and Hesse showed more modest increases of 4%.
In the more expensive big cities the increases were also more muted, after years of steady rises. There were relatively moderate increases in asking rents in Frankfurt (up 1.4% on the prior-year quarter), Stuttgart (2.4%) and Munich (3.5%). In contrast, asking rents in Düsseldorf (5.9%), Leipzig (7.8%) and Berlin (8.3%) increased particularly sharply.
Further studies by DZ Bank and the Association of German Pfandbrief Banks (VdP) also recently confirmed that rents for new leases have risen strongly again, putting the rise at about 5% over the last twelve months. They see the reason for the "noticeably rising rents" as, in addition to the shift in demand, also partly due to increasing immigration with many refugees from Ukraine, said DZ Bank.
The latest "Wohnpreisspiegel" report from housing association IVD also confirms the upward price trend, particularly in smaller and medium-sized towns and cities, likely reflecting the withdrawal from the market of properties for sale. The trend is unlikely to be reversed any time soon, says the report, which is based on data from actual transactions, rather than advertised offers.
According to IVD president Jürgen Michael Schick, purchase prices for German residential property had continued to rise through to the end of this year's first half, with apartment prices rising by about 12.1% year-on.year, although there is evidence of mildly falling prices since then. Schick said it wasn't clear where there market was headed in the coming months. "Many prospective buyers are currently having to reassess their options in light of the rapid rise in interest rates," he said. "However, there is much to suggest that the market can come back quickly."
That's because two conflicting trends are currently battling it out in the market, he said. On the one hand, many buyers no longer have as much financial leeway as before, while on the other, many Germans with assets are still looking for an investment that will partially protect them from inflation - and that strategy often leads back to property.
