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RENTING

EXPLAINED: Where rents are falling (and going up) in Germany’s biggest cities

In eight out of 14 major cities in Germany, rents are stagnating or falling, a new survey has found. But in Berlin rents have gone up by two percent since the rent cap was lifted.

EXPLAINED: Where rents are falling (and going up) in Germany's biggest cities
Flats in Berlin-Mitte, viewed from the Berlin TV Tower in August 2020. Photo: picture alliance/dpa | Christoph Soeder

Rents in the most expensive German cities – Munich, Frankfurt and Stuttgart – are stagnating or falling, according to real estate firm Immowelt’s Mietkompass (rent compass) for the 2nd quarter of 2021.

However, there are increasing prices in some affordable cities: rent costs for Essen and Bremen have each gone up by two percent on average. 

For the study, square metre prices of existing flats offered on immowelt.de in the 2nd quarter of 2021 were compared with the previous quarter.

EXPLAINED: Munich’s radical new approach to solving the housing crisis

Renting is a huge topic in Germany. The country has the lowest level of property ownership in the EU, with just over half of the population owning their own home and the rest opting to rent. 

Rents go up in Berlin after Mietendeckel fail – and in Cologne

It’s been a turbulent few months in Berlin. In April, the federal constitutional court declared Berlin’s rent cap, which had been brought up in February 2020, null and void. 

Tens of thousands of tenants in Berlin saw their rents hiked up by hundreds of euros each month, while some were hit with bills for backdated rents – in many cases amounting to thousands of euros.

READ ALSO: ‘Stressed and depressed’: How Berlin’s rent cap fiasco has affected foreign tenants

In the second quarter of 2021, the price curve of Berlin flats is – perhaps not surprisingly, pointing upwards again, said Immowelt. Asking rents in Berlin have so far risen by 2 percent to €9.26 per square metre. In the first quarter, that number was €9.06.

Since many landlords included so-called ‘shadow rents’ in their contracts while the rent cap was in force so tenants would pay a higher cost if the Mietendeckel was thrown out in court, asking prices have adjusted upwards again fairly quickly. 

However, Jan-Carl Mehles, group leader for market research at Immowelt, said the Berlin rise has been “comparatively moderate” so far “considering that there have been no price jumps in the past 1.5 years”.

He added: “Nevertheless, we assume that there will be further catch-up effects in the coming months and that rents will rise significantly.”

Adding more fuel to the housing battle in the capital, Berliners are to vote later this year on whether to force major property companies to sell thousands of their flats to the city. 

Just as in Berlin, the Immowelt Mietkompass also records an increase of two percent in asking rents in Cologne compared to the previous quarter.

A map showing the average cost and changes in rent in the second quarter of 2021 compared to the first quarter according to the Immowelt analysis. Source: Immowelt

However, the price level in the Rhine metropolis is clearly higher. Tenants should expect to pay around €10.51 per square metre in flats. Prices in Hamburg also continued to rise slightly: plus one per cent in the past three months. The average square metre in the Hanseatic city costs €10.91.

A breather in Munich, Frankfurt and Stuttgart

In the most expensive German cities, however, tenants can breathe a little easier.

In Munich, rents are stagnating – but they are still at an outrageously high level. Existing flats in the Bavarian capital cost around €16.54 per square metre, almost €5 more than in Germany’s second most expensive city, Frankfurt am Main.

READ MORE: Housing: How did it get so expensive to live in Munich? 

In the banking metropolis, rents are actually declining slightly. While in the first quarter, tenants had to pay €11.95 per square metre, it is currently €11.66 – a drop of two percent and, next to Hanover (also minus two percent), the strongest decline of all cities.

The picture is similar in Stuttgart and Düsseldorf. In both cities, asking rents have fallen slightly by one percent.

In general, a limit on prices now seems to have been reached in the most expensive cities.

Housing in Frankfurt, which has seen a slight decrease rent costs, according to a study. Photo: picture alliance/dpa | Sebastian Gollnow

Many households are already heavily burdened by housing costs: an Immowelt analysis showed that a household in Munich would have to earn just under €6,000 a month to achieve a healthy housing cost ratio of 30 percent. In Frankfurt, a household requires €4,500, in Stuttgart €4,200.

Rent going up in affordable big cities

While rents are stagnating in many of the more expensive cities, increases can still be seen in the inexpensive large cities. In Essen and Bremen, for example, the price trend is upwards (both plus two per cent). But with asking rents of just €7.61 per square metre in Essen and €8.08 in Bremen, the price level remains moderate.

Leipzig, the cheapest place to live of all the cities surveyed, recorded an increase of one percent in housing costs. Tenants have to pay around €6.51 per square metre – around €10 less than in Munich, the report found.

In neighbouring Dresden, where rents are stagnating, tenants currently pay €6.78 per square metre on average. The low price level in the eastern German cities is related to the comparatively large vacancy rate compared to western regions. But both cities continue to enjoy high popularity, especially among young adults. Rents could consequently rise more strongly in the coming years. 

How did the study come about?

Immowelt’s quarterly report looks at rental prices for flats in the major German cities that have more than 500,000 residents. 

The analysis is based on flats advertised on immowelt.de and aims to provide a snapshot of the German rental market and how it is developing.

READ ALSO: German housing co-ops: What are they and how do I sign up?

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RENTING

Reader question: Can I Airbnb my German flat during Euro 2024?

The UEFA European championship will be taking place in 10 cities across Germany this summer. If you live in one of them, are you allowed to make a bit of extra cash by renting out your space?

Reader question: Can I Airbnb my German flat during Euro 2024?

Nearly three million football fans are expected to descend on Germany for the UEFA Euro tournament this summer. A total of 10 cities across Germany will field matches for the Euros.

This map on UEFA’s website shows the German cities where games will be taking place during the tournament, which runs from Friday June 14th to Sunday July 14th, 2024.

The event has many people wondering if they could earn some extra cash by renting out their homes to tourists. Here’s how you can prepare to rent out your home and stay in line with the rules. 

READ ALSO: Euro 2024: Germany to sell cheap train tickets for fans attending games

Can I put my home on rental platforms like Airbnb in Germany?

Yes, Airbnb is not outlawed in Germany. But depending on the state there may be some additional regulations to keep track of. 

What rules do Airbnb hosts in Germany follow?

All rental hosts are required to collect and retain information about guests who stay at your property for three months or less. Hosts can either purchase reporting certificates online or create certificates themselves to meet this requirement. If you retain the guest data yourself, you will be required to comply with all data protection laws like the European General Data Protection Regulation (GDPR). 

READ ALSO: What to know about renting out your home as an Airbnb in Germany

Depending on the state and city, local authorities may have additional requirements for rental hosts. 

The tournament kicks off in Munich. The Bavarian city’s regulations allow you to rent your primary home to guests for a combined total of eight weeks per calendar year without a permit. Still, you could run into trouble if more than half of the floor space is rented out without a permit.  

Berlin has strict regulations regarding short-term rentals. There are no limits for primary residences, but you are required to receive permission from district offices. The city introduced a registration system for anyone interested in renting out part of their home for a short term period. 

If less than half of the space will be rented out, you’ll need to update the relevant district authority of your plans to receive a registration number that you must include when advertising the property. You are required to obtain a permit if you plan to rent more than half of your home. 

READ ALSO: Could a landmark court ruling help solve Berlin’s housing crisis?

Hamburg also has implemented a registration system to monitor the number of holiday rental homes listed on sites like Airbnb. It doesn’t cost money to get a registration number, and you are allowed to rent out a room for eight weeks or less per year. 

Apartments in Hamburg's Eimsbüttel area.

Apartments in Hamburg’s Eimsbüttel area. Photo: picture alliance/dpa | Marcus Brandt

Can I rent out my flat if I don’t own it?

If you’re renting a property in Germany, subletting without permission can get you in trouble with the law. Tenants interested in subletting their room or apartment are required to get written permission from their landlord before they can rent their space on platforms like Airbnb and Homeaway. 

Do different rules apply to second homes?

Yes, second homes, or places you live in for less than half of the year are governed by different guidelines. 

In Germany, secondary residences cannot be rented out for more than 90 days per year. If you live in the flat you may be allowed to rent it out during periods of absence (i.e., when you are travelling), so long as you don’t change the main function of the home to renting. 

What about taxes?

German tax law requires rental income to be taxed alongside other incomes. If you receive income in Germany from short-term lets, you are legally required to report the income amounts and file a tax return

Still, there are a few exceptions. If your rental income in a year is below €520, there are no taxes charged. But if your rental income exceeds €520 then you will be taxed on the entire amount. Of note, tax only considers income to be the profit retained after expenses are deducted. 

If you don’t intend to make renting your property a habit, you may be able to classify the income as a “hobby” by the tax office. Under this classification, if you end up bringing in an income it doesn’t have to be taxed, but you also cannot claim any expenses or losses. This policy does not apply to unlimited rentals or properties charging rent at 66 percent of other local rent prices.  

Rental property may also be subject to VAT like any other business. But good news, if your rental income does not exceed €17,500 and you don’t expect to earn more than €50,000 in a year, you are not liable for VAT. 

What happens if you break the rules?

You can face eye watering fines of up to €500,000 depending on the state you live in. Some cities like Frankfurt are cracking down by employing full time “Airbnb hunters” to look for illegal listings of homes and furnished residences online.  

Note that laws are constantly changing, so be sure to check your state’s website for up to date information on short term rental regulations.

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