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PROPERTY

German property prices rise at highest rate in two decades

The cost of buying a home has jumped significantly in the past year in Germany, with major cities and rural areas seeing the biggest rise in prices.

Published: 28 March 2022 13:10 CEST
Property prices German
A row of houses in Munster, Germany. Photo: picture alliance/dpa/LBS West | LBS West

According to the latest data from the Federal Office of Statistics (Destatis), residential property prices in Germany rose by an average of 12.2 percent between the final quarter of 2020 and the final quarter of 2021. 

This is the biggest price increase in residential property prices in more than two decades.

It followed two previous quarters of strong growth, with prices springing up by 12 percent in Q3 and by 10.8 percent in Q2 compared to the previous year’s figures. From Q3 to Q4, property prices went up by just over three percent on average in Germany.

In the annual average for 2021, prices for residential property in Germany rose by 11 percent overall compared to 2020 – almost double the average growth of 7.8 percent in 2020. 

The latest statistics suggest that Germany is seeing a renewed boom in its housing market after the pandemic, which could reflect the low interest rates on mortgages and the impetus to invest savings in property to prevent them being eroded by inflation.

READ ALSO: EXPLAINED: The hidden costs of buying a house in Germany

Rural areas see highest growth

With a culture of remote working taking hold in Germany since the pandemic struck in 2020, prices in rural areas showed the strongest growth of all last year.

According to Destatis, the cost of buying a detached or semi-detached house in less populated rural regions rose by 15.9 percent against the previous year, while flat prices went up 13.2 percent. In more densely populated rural districts, prices for detached and semi-detached houses rose by 14.5 percent and prices for condominiums went up by 11.2 percent.

This trend could continue as more and more people consider swapping their urban lifestyle for a gentler pace of life in the countryside.

Average property price increases

Average annual price increases in the German property market from 2000-2021. Source: Destatis

A recent survey by property search portal ImmoScout24 revealed that two-thirds of Germans had thought about moving to the country in the past few years, with most attracted by the idea of being close to nature and being able to have their own garden. 

Since the start of the pandemic, demand for family homes out in nature has gone up by 30 percent, ImmoScout24 revealed. The demand was particularly strong in the green belt areas around Berlin and Hamburg. 

Significant price hikes in major cities

In a reflection of the fiercely competitive rental market, property prices in Germany’s seven major metropoles also rose steeply in 2021. 

Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf all saw above-average price increases in Q4, with prices for detached and semi-detached houses rising by 12.8 percent and prices for flats by 12.7 percent year-on-year.

A small consolation for potential big-city buyers: the price hikes in the metropoles appear to be tapering off a bit.

Between the third and fourth quarter, prices for detached and semi-detached houses in metropolitan areas rose by 1.4 percent, while flat prices rose by just 0.7 percent. This is a marked change to the rate of growth just a quarter earlier, when prices for houses jumped by 3.5 percent and prices for flats had jumped by 3.8 percent compared to Q2. 

Currently, according to property portal Immowelt, houses in Germany cost an average of around €2,800 per square metre, while flats cost an average of around €3,200 per square metre, though there are strong regional differences.

Saxony, for example, remains a highly affordable place to buy a starter home, while in Bavaria and its capital, Munich, buyers can expect some of the highest property prices in the country. 

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BERLIN

Why are Berlin rents soaring by 20 percent when there’s a rent brake?

The Berlin Tenants' Association says rents rose by 21 percent last year, and a recent report confirms a similar increase. Germany's rent price brake put in place in 2015 was intended to hold rents steady, so why are they continuing to soar?

Published: 18 April 2024 13:14 CEST
Why are Berlin rents soaring by 20 percent when there's a rent brake?

A report released Wednesday by two leading real-estate firms found that asking rents in Berlin rose by 18.3 percent to €13.60 per square metre despite the rent brake that’s meant to control the increase. 

The report was compiled by real estate financier Berlin Hyp and the global real estate service provider CBRE.

The report also notes that the number of rental apartments offered in Berlin shrank drastically.

In the real estate market however, prices have come down somewhat. The report suggests asking prices for apartment buildings fell by 11.7 percent, and asking prices for condominiums fell slightly by 1.4 percent.

These findings are based on evaluations of 23,300 rental offers, around 28,400 purchase price offers for condominiums and apartment buildings as well as 220 new construction projects with around 34,900 apartments in Berlin for 2023.

Where are rents the highest and the lowest in Berlin?

According to the report, Berlin’s rental prices top out in Charlottenburg and Friedrichshain – at rates up to €26 per sq/m.

Marzahn was the kiez or neighbourhood that had the lowest rents, at €16.03 per sq/m at the most. Spandau and Reinickendorf were the next cheapest neighbourhoods. 

The range of rent prices was wide across every neighbourhood in Berlin. Across the capital city, rents on the bottom end were as low as €6 per sq/m – amounting to a difference of nearly €20 per sq/m between rents in the upper and lower market segments.

READ ALSO: Is there any hope for Berlin’s strained rental market?

While Berlin’s rapidly increasing rents combined with its severe housing shortage makes moving to or within the city notoriously frustrating, it does not have the highest rent prices in Germany.

According to Statista, Munich has the highest rent prices by far, at a rate of €19.23 per sq/m in 2023. Frankfurt am Main had the next highest rent on average, at €14.80 per sq/m.

Close behind, Stuttgart has held the third highest rents in Germany in recent years, but as of 2023 it looks like Berlin has caught up.

Hamburg, Düsseldorf and Cologne all had rent prices between €12 and €13 per sq/m on average.

Is the rent price brake failing?

In an attempt to slow the rapid rise of rents in competitive housing markets, the German government introduced a rental price brake (Mietpreisbremse) in 2015, which was recently extended until 2029.

But it appears that the rent brake has done little to slow the rise of rents in Germany’s most competitive markets.

The Berlin Tenants’ Association (BMV) welcomes the extension of the rent brake, but says that it needs urgent tightening and strengthening to adequately keep rents affordable.

Mieten runter "rents down"

The words “Rents down” are graffitied on the wall of a rental building. About 75% of Berlin rents are set illegally high, a legal expert told The Local. Photo: picture alliance/dpa | Monika Skolimowska

The rent brake is intended to prevent landlords from asking for rents more than 10 percent above local comparative rates. But with no significant consequences for violating the rent brake rule, the BMV says landlords regularly raise rents well above the legal limit.

According to the BMV, rents were excessive in 98 percent of the cases that it reviewed in 2023.

“Many landlords ignore the requirement, and try to circumvent the rent brake and demand excessive rents,” says Managing Director of the Berlin Tenants’ Association,  Ulrike Hamann-Onnertz.

“At the same time, the enforcement of the rent brake is associated with a great deal of effort and legal risk for tenants.”

Renters in Germany’s high-demand rental markets can invoke the rent brake to reduce their rent, if they find that their ‘cold rent’ (the base rent without additional costs) is set more than 10 percent above the average rate for a comparable unit in the same neighbourhood. Average rates are recorded local indexes, called Mietspiegel. Here’s one for Berlin.

READ ALSO: German rent brake to be extended until 2029: What you need to know

However, there are a number of exceptions to the rent brake. Perhaps the most frustrating of which is a loophole that allows landlords to maintain an overpriced rent if the previous tenant did not challenge it. 

“Rents agreed in violation of the rent brake can also be included in the rent index and in turn lead to an upward spiral of rents,” Hamann-Onnertz said.

The BMV recommends three policy adjustments to fix the holes in the rent brake which include: applying sanctions to landlords who violate the rent brake, eliminating most of the exceptions to the rent brake, and supporting tenants’ in enforcing their rights through municipal inspection bodies.

Whether policymakers in Berlin (and beyond) will heed any of the BMV’s advice is another story.

READ ALSO: ‘Tense housing situation’: Why a Berlin renter can’t be evicted for two years

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