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HOUSING

Rising rents and stiff competition: What you need to know about Germany’s housing market

Long queues at apartment viewings, extensive application documents and lots of rejections. Let’s face it: good apartments that aren’t too expensive are difficult to secure in Germany.

Rising rents and stiff competition: What you need to know about Germany's housing market
A demonstrator carrying an 'apartments for all' placard at a demonstration against rising rents in Hamburg. Photo: DPA

But now the federal government has recognized the problem and has called a housing summit.

At the residential summit happening this Friday in Berlin, different housing and building organizations will join politicians to discuss these problems together. On Thursday a meeting is also taking place between trade unions, social associations and tenants’ federations.

Why is it so difficult in the housing market?

It’s hard because there is a huge regional demand – and not just in metropolitan areas. Living space is now lacking in one-third of all German districts and cities, according to the evaluation institute Prognos which carried out an investigation in June 2017.

Due to that, the situation in 138 of 402 German cities and districts is problematic. The housing market in Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart is particularly tense.

The bottom line, and perhaps surprisingly, is that there are even more apartments than a few years ago: in 2010, there were 495 apartments per 1,000 inhabitants, while last year there were 12 apartments more.

At the same time, the apartments are getting bigger: the average area per person has increased by 1.5 square meters in seven years. Although it should be noted that many people, especially in cities, are having to accept smaller apartments due to costs. 

How are rents in Germany developing?

They are only going in one direction and that is up: In 2017, rents for new contracts rose by 4.5 percent compared to the same period in the previous year. The price increase slowed slightly compared to 2016 (from 4.9 percent).

On average, tenants paid €7.99 per square meter, according to the Federal Institute for Building, Urban and Spatial Research (BSSR). However, it was not the hard-to-find actual rental prices that were evaluated, but asking rents, for example the prices landlords require for advertisements.

Construction work on housing in Hamburg. Photo: DPA

Where is the situation particularly bad?

The most expensive apartments were advertised in Munich, with an average of €16.65 per square meter. It was followed in second place by Frankfurt am Main (€13.09) and Stuttgart (€12.62).

If you are looking for a cheap apartment, you have to move into the country: in the regions of Wunsiedel (Bavaria), Vogtlandkreis (Saxony), Holzminden and Lüchow-Dannenberg (Lower Saxony), apartments were offered for less than €4.50 per square meter.

View of housing in Berlin. Photo: DPA

And do people go to the countryside?

It seems people would like to. “If the Germans had a choice regardless of their financial situation, they would most like to live in a small rural community,” notes the Federal Foundation for Building Culture in a study published at the end of 2016.

However, very few people follow the call of the country. Above all, “artists, designers and cultural workers” deliberately opted for a move. On a large scale, people do not move to the countryside.

According to an evaluation by the BBSR, between 2010 and 2016 large cities and their surrounding areas grew. In contrast, sparsely populated districts away from metropolitan areas lost inhabitants.

What is the Federal Government doing to alleviate the housing shortage?

There is a whole range of projects: The Baukindergeld is intended to make it easier for families with one or more children in the household to build their first new home or buy real estate. Through the programme, families can receive a subsidy of €12 per child per year over ten years.

The brake on rental prices prohibits landlords from re-letting a property at more than ten percent above the local comparable rental demand. The SPD wants to go further and says that existing rents should only be allowed to rise for a period of five years in parallel with inflation.

An extra tax bonus should lead investors to build affordable housing. In addition, two billion euros in federal funds for social housing are planned. The CDU/CSU and SPD have set a target of 1.5 million new homes in the next few years.

Does that help?

Trade unions, social organizations and tenants' association say “that the federal government is unwilling or unable to seriously redirect and make a policy for tenants and apartment seekers”.

The alliance behind the Alternative Residential Summit which is taking place this Thursday in Berlin says there is a housing crisis in Germany. Under the banner and hashtag 'Mietenwahnsinn' – rent madness – they are calling for, among other things, sharper brakes put on rental prices and to lower regular rent increases “drastically”.

They also want to “stop forced evictions” and improve the protection of residents against evictions. The group is also demanding regulated land prices and land use, and that public land should no longer simply be sold to the highest bidder.

Scaffolding on an apartment building in Prenzlauer Berg, Berlin. Photo: DPA

What does the industry say?

Associations often criticize that many incentives for the construction industry are only planned for a few years and not in the long term. It's too early to tell if a a serious increase in investment will take place.

“Increasing land prices and tax rates, strict usage requirements, lengthy planning permission and planning procedures are the big enemy of affordable new building,” says Andreas Mattner, president of the Central Real Estate Committee. The association calls for simplified construction law, with type approvals for houses at the federal level and tax relief.

Should you be buying an apartment or a house now?

Anyone taking out a loan can benefit from favourable interest rates. On the other hand, there is a strong demand for apartments, which drives up prices.

In the end, buying a property depends above all on personal factors. Buyers should divide the purchase price by the annual ‘cold rent’ (without bills added on) and calculate how many years the purchase pays off.

Buying can be better than renting, says Jörg Sahr, editor of the journal Finanztest. That's provided that buyers bring to their project at least 20 percent equity, and pay back their loan over 30 years with more than two percent, he says.

SEE ALSO: Renting in Germany – what you need to know

See ALSO: Where in Germany it now pays to buy a home instead of renting

A potential risk factor: at the moment, loans are cheap, but usually buyers rarely finance the entire price of a single loan. In the case of a follow-up loan, higher interest rates could be due in the future. Consumer advocates therefore recommend loans with a long-term fixed interest rate.

'Affordable rent instead of fat returns'. A demonstration against rising rents in Berlin. Photo: DPA

Who actually rents apartments in Germany?

At the end of last year, there were just under 42 million homes in Germany according to the Federal Statistical Office. There are no details on how these are used exactly.

However, certain indications are provided in surveys by the Federal Office from 2014, when there were just under three million fewer apartments. At that time, about 42 percent of the apartments in residential buildings were occupied by the owners, 50 percent were rented, and the rest were uninhabited at the time of the survey.

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PROPERTY

10 essential tips for avoiding rental scams in Germany

Rental scams are on the rise in Germany, and fraudsters are becoming more sophisticated than you may think. We spoke to a couple who were scammed in Berlin to put together tips to stay safe while house hunting.

10 essential tips for avoiding rental scams in Germany

When it comes to settling in Germany, one of the most stressful and difficult tasks you’re likely to face is finding a place to live.

With the country in the grip of an ever-worsening housing shortage, there aren’t enough rental properties to meet the high demand – especially in big cities like Berlin, Munich and Frankfurt – and the flats that are available can often stretch even the most healthy of budgets. 

With renters desperate to find affordable homes, crafty scammers have seized the chance to place fake ads on the market, often in dream locations with lower-than-average rents. 

While some of these scams may be easy to spot, others can be highly sophisticated, with fraudsters setting up professional-looking websites and even allowing hopeful tenants to view their properties in person.

Recently The Local reported on a Polish couple who lost around €7,000 through a rental scam in Berlin. The scammers had sublet a beautiful Altbau apartment in the popular district of Neukölln and created an advert for it via a fake letting agent website, then arranged for people to use a key box to view the property while the real tenants were away. 

READ ALSO: How sophisticated scammers are targeting desperate Berlin tenants

Despite checking the contract over with legal experts from their local tenants’ association, nobody saw anything out of the ordinary – that is, until they tried to access the apartment and found a family already living there.

So, how do you protect your hard-earned savings and steer clear of scammers while looking for a new home?

Here are 10 important ways to protect yourself from rental scams. 

1. Be alert to suspicious signs 

The key to avoiding scammers in Germany is to be fully clued up on the warning signs. Was the listing for the property uploaded in the middle of the night, is the advert thin on details or written in bad German or English, and does the offer feel too good to be true?

Though it would be nice to believe there are still cheap flats to be found, finding an attractive property at an overly reasonable price is usually a red flag. 

Hamburg

Modern apartments in Hamburg. Photo: picture alliance/dpa | Daniel Bockwoldt

If someone claiming to be a landlord contacts you out of the blue, that’s also your cue to run a mile. With so many people looking for housing, most letting agents and landlords will have more than people looking to rent their properties without needing to get in touch with people themselves. Anyone who does is more than likely to be a scammer.

2. Rule out landlords who say they live abroad

One of the major warning signs to look out for is a landlord who claims to be renting the property from abroad, or who says they are out of the country for other reasons, like a last-minute business trip.

That’s usually a scammer’s way of excusing the fact that they won’t be able to meet you personally or even show you the property before you rent it.

“When the country the landlord lives in appears then I would say there’s a really big chance this is a scam,” said Kuba Rudzinski, one of the victims of the Berlin-Neukölln rental fraud.

Even if the excuse seems plausible, your best bet is to ignore anyone who tries to sell you a story about living abroad and simply move on with your house hunt.

READ ALSO: Why Germany’s housing crisis is expected to drag on

3. Do your research online

Before committing to anything, take time to do some thorough research to scope out the property, landlord and letting agent. 

Running the pictures and text used in apartment listings through a search engine like Google will help you quickly identify stock photos and text stolen from other listings. For pictures, this is known as a reverse image search. 

A laptop

Photo by 2H Media on Unsplash

It’s also worth checking that any websites you’re sent to are fully functional and not copies of other letting agent sites, and that any email addresses match the website domain. 

READ ALSO: How much deposit do I have to pay when renting in Germany?

4. Visit the property and ask around 

Never agree to rent a property without seeing it in person first. Arrange a viewing and take the opportunity to ask questions about the property and the neighbourhood. 

Kuba also recommends speaking with the neighbours in the building to check if the property is genuinely being rented. 

“Go to the place before and ask the neighbours, is this flat really for rent? Because these people generally know,” he said. “You’ll need to convince yourself to do it of course, but just ask in the building, ask on the floor where the flat is.”

5. Don’t transfer the full deposit in advance

Advance payments for anything, whether it’s furniture, a deposit or getting a chance to view the property, should be considered a major red flag.

Under German law, you are usually only expected to pay the deposit by the start of the agreed rental contract – and certainly not several months in advance.

Euro notes lie next to some house keys on a table.

Euro notes lie next to some house keys on a table. Photo: picture alliance/dpa/dpa-tmn | Andrea Warnecke

You are also legally entitled to pay your three months’ deposit in three instalments on top of your first three months’ rent after moving in, so definitely be cautious of landlords that place pressure on you to transfer a large lump sum.

If you’re really concerned, look into alternatives for paying your deposit, such as Kautionversicherung (deposit insurance) or a Mietkautionssparbuch, where you open a bank account and pledge the amount to the landlord, rather than transferring the money directly. 

6. Insist on meeting the landlord or letting agent in person

If a landlord or letting agent refuses to meet you in person or insists on conducting all communication online, they’re probably not who they say they are. 

Insist on meeting face-to-face to verify their identity and ensure they have a legitimate connection to the property.

7. Avoid sending documents straight away 

Not all rental scams are about getting money from you directly: many scammers are simply after your personal details for the purposes of identity theft.

Be wary of providing personal documents or sensitive information before you’ve verified the legitimacy of the rental agreement, especially when it comes to things like passport scans or other forms of ID. 

READ ALSO: Five common rental scams in Germany and how to avoid them

8. Seek legal advice from experts

If you’re unsure about any aspect of the rental agreement or if something seems suspicious, seek advice from legal experts or tenants’ associations. 

However, be aware that this isn’t always a cast-iron guarantee that a tenancy is legitmate. Over the past few years, fraudsters have become increasingly sophisticated, even down to producing water-tight rental contracts for would-be tenants. 

An estate agent hands over keys to an apartment. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

According to civil lawyer Emilia Tintelnot, becoming a member of a tenants’ association can be a good way to get affordable legal advice, and it can also be helpful to set up legal insurance to ensure you can access help when you need it without having to pay lawyers’ fees up front.

9. Be wary of stereotypes 

Avoid making assumptions based on stereotypes or preconceived notions about someone’s gender or nationality, as this may cause you to overlook things you might otherwise see as warning signs.

In Kuba’s case, the fact that the fraudsters were German made them appear more legitimate in his eyes, as Polish people tend to see Germans as law-abiding and trustworthy. 

Be aware that scammers can come from any cultural background and may use a variety of tactics to deceive unsuspecting renters.

10. Keep an extensive paper trail 

Document all communication, agreements, and transactions related to the rental process, including phone numbers and any bank details provided.

According to the Berlin police, this type of evidence can be crucial for an investigation if you do suspect a scammer.

While evidence can differ across cases, “pictures, contact details used by the perpetrators, original documents, bank details with payment receipts” are particularly helpful for investigators, and could help the police stop the scammers for good. 

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