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REAL ESTATE

EXPLAINED: What’s happening to house prices and rents in Germany amid the coronavirus crisis?

There's an increased demand on the real estate market in Germany at the moment, and there's drama looming for tenants in Berlin. Here's a look at what's going on.

EXPLAINED: What's happening to house prices and rents in Germany amid the coronavirus crisis?
Frankfurt am Main. Photo: DPA

Ever dream of owning your own home in Germany? Well, sadly, it has become more expensive since the beginning of the pandemic.

In the second quarter (April to June), condominiums were on average 1.3 percent more expensive than at the beginning of the year. Compared to the second quarter of 2019, the increase was 5.9 percent. That's according to Research and Consulting Company for Housing, Real Estate and the Environment (F+B), which Spiegel reported on Monday.

Surprisingly, the price increase for single and two-family houses was even higher than that of apartments. Compared to the previous quarter, the prices of houses increased by 2.9 percent – and even by nine percent year-on-year.

This is unusual because prices for condos in Germany have almost always risen much faster than those for houses over the past 10 years.

Experts said more people are choosing to buy homes in Germany.

“In view of historically unparalleled low lending rates, it seems to be more economical for many buyers to invest in owner-occupied properties instead of renting,” said F+B Managing Director Bernd Leutner.

READ ALSO: Housing in Germany – here's where demand and prices are soaring

It is not known for definite whether the sharp rise in the price of single-family homes is due to increased demand resulting from the coronavirus crisis, for example because families are looking for more space and gardens – but it could be a factor.

The F+B Residential Index measures the rent and price developments on the German real estate market. The index is based on the supply data of more than 30 million properties throughout Germany.

What's happening to rent?

Unlike homes, rents have hardly risen at all in the past two years. Even in the second quarter, there was only a minimal increase in new contract rents, researchers found. Compared to the previous quarter, rents rose by 0.4 percent and by one percent year-on-year.

Rents for existing properties rose by 1.3 per cent year-on-year. “On a national average, the increase in rents is therefore manageable,” said Leutner.

Berlin tenants face paying back millions of euros

There could be major problems looming for Berlin tenants

The controversial rent freeze came into force on February 23rd this year which resulted in lower rents for many tenants. But experts say it could be overturned at any moment, leaving tenants liable to pay pack the difference.

The core issue being debated in courts is whether the state of Berlin is allowed to legislate in this area.


Housing in Berlin. Photo: DPA

If the Constitutional Court overturns the rent cap, many tenants in Berlin will face paying back huge amounts, according to F+B.

Due to the still unclear legal situation, there is currently a split rental market in the city. There are “shadow rents”, i.e. “the market rents”, which are usually higher than the price of the rent cap.

And on the other hand, there's the “official” rent costs corresponding to the rental price cap. The research company analysed the advertised rental apartments before and after the law came into force and “observed the existence of two rent indications in one and the same apartment advertisement”.

READ ALSO: Berlin's district court rules in favour of rental price cap

This is often associated with the remark that “the landlord reserves the right to retroactively claim the difference between the rent cover rent and the market rent”. The tenant has to agree to this in the rental contract.

SEE ALSO: The complete guide to how you can (still) live cheaply in Berlin

According to F+B the difference is clear to see: for 3,133 apartments offered between February 23rd 2020 and June 30th, F+B assumes a capped average rent of €7.05 per square meter

However, the market rent for the apartments is an average of €13.63 per square metre – a difference of €6.58 per square metre. With an average apartment size of 60 square metres, this would mean a total difference of €1.2 million per month which tenants would have to cough up.

“The longer the decision drags on, the greater the threatening additional claims,” says F+B managing director Leutner. At the same time, the massive difference in costs shows the advantages of the new rent freeze for tenants.

In any case, a quick clarification would be in the interest of all parties involved, said the research firm.

READ ALSO: 'We're setting a clear stop sign': Berlin passes five-year rent freeze law

Despite receiving the support of Berlin's state parliament, the law is opposed by Germany's federal government which argues that regulating housing costs is a federal rather than a state matter.

 

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LIVING IN GERMANY

Living in Germany: Battles over Bürgergeld, rolling the ‘die’ and carnival lingo

From the push to reform long-term unemployment benefits to the lingo you need to know as Carnival season kicks off, we look at the highlights of life in Germany.

Living in Germany: Battles over Bürgergeld, rolling the 'die' and carnival lingo

Deadlock looms as debates over Bürgergeld heat up 

Following a vote in the Bundestag on Thursday, the government’s planned reforms to long-term unemployment benefits are one step closer to becoming reality. Replacing the controversial Hartz IV system, Bürgergeld (or Citizens’ Allowance) is intended to be a fair bit easier on claimants.

Not only will the monthly payment be raised from €449 to €502, but jobseekers will also be given a grace period of two years before checks are carried out on the size of their apartment or savings of up to €60,000. The system will also move away from sanctions with a so-called “trust period” of six months, during which benefits won’t be docked at all – except in very extreme circumstances. 

Speaking in parliament, Labour Minister Hubertus Heil (SPD) said the spirit of the new system was “solidarity, trust and encouragement” and praised the fact that Bürgergeld would help people get back into the job market with funding for training and education. But not everyone is happy about the changes. In particular, politicians from the opposition CDU/CSU parties have responded with outrage at the move away from sanctions.

CDU leader Friedrich Merz has even branded the system a step towards “unconditional Basic Income” and argued that nobody will be incentivised to return to work. 

The CDU and CSU are now threatening to block the Bürgergeld legislation when it’s put to a vote in the Bundesrat on Monday. With the conservatives controlling most of the federal states – and thus most of the seats in the upper house – things could get interesting. Be sure to keep an eye out for our coverage in the coming weeks to see how the saga unfolds. 

Tweet of the week

When you first start learning German, picking the right article to use can truly be a roll of the “die” – so we’re entirely on board with this slightly unconventional way to decide whether you’re in a “der”, “die”, or “das” situation. (Warning: this may not improve your German.) 

Where is this?

Photo: picture alliance/dpa | Boris Roessler

Residents of Frankfurt am Main and the surrounding area will no doubt recognise this as the charming town of Kronberg, which is nestled at the foot of the Taunus mountains.

This atmospheric scene was snapped on Friday morning, when a drop in temperatures saw Kronberg and surrounding forests shrouded in autumnal fog.

After a decidedly warm start to November, the mercury is expected to drop into single digits over the weekend. 

Did you know?

November 11th marked the start of carnival season in Germany. But did you know that there’s a whole set of lingo to go along with the tradition? And it all depends on where you are. First of all, the celebration isn’t called the same thing everywhere. In the Rhineland, it’s usually called Karneval, while people in Bavaria or Saxony tend to call it Fasching. Those in Hesse and Saarland usually call it Fastnacht. 

And depending on where you are, there are different things to shout. The ‘fools call’ you’ll hear in Cologne is “Alaaf!” If you move away from Cologne, you’ll hear “Helau!” This is the traditional cry in the carnival strongholds of Düsseldorf and Mainz, as well as in some other German cities.

In the Swabian-Alemannic language region in the southwest of the country, people yell “Narri-Narro”, which means “I’m a fool, you’re a fool”. In Saarland at the French border, they shout “Alleh hopp!”, which is said to originate from the French language. 

Lastly, if someone offers you a Fastnachtskrapfe, say yes because it’s a jelly-filled carnival donut. And if you’re offered a Bützchen? It’s your call, but know that it’s a little kiss given to strangers!

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