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INTERVIEW: Is there a solution in sight for Berlin’s housing crisis?

Housing is getting more expensive around the Bundesrepublik, with the problem particularly pronounced in cities like Berlin and Munich. While there's no quick fix, experts told The Local's Germany in Focus podcast that not all hope is lost.

Housing complexes in Berlin.
Housing complexes in Berlin. Photo: picture alliance/dpa | Monika Skolimowska

Even many Berlin veterans will tell you it’s hard to remember the German capital without its crazy housing stories.

Having arrived myself in late 2011, you’d hear all sorts of anecdotes even then of the kinds of things people who had a room to offer would ask for.

Whether it was advising that one of the flatmates slept in a coffin, to requests for nude pictures as the household was explicitly nudist – it didn’t take long for a newcomer to realise that those offering rooms had the upper hand over those who needed them. “Casting parties” where 50 people would view a flat at once were common.

It’s only gotten worse. A lot worse.

READ ALSO: PODCAST: How bad is the housing situation in Germany?

Red Tape Translation Founder Kathleen Parker came to Berlin herself in 2012 and started working in relocation. “There was an apartment shortage then, but that is nothing compared to what is happening right now,” she told The Local’s Germany in Focus podcast. “It’s extremely difficult.”

Parker says relocating to Berlin is itself becoming time-consuming and costly – and that’s before you’ve even put down a deposit. Relocation firms offering flat search packages are booked out until October. Many will often only accept people who have “reasonable” enough expectations and a high enough budget.

“Everyone else seems to be left to fend for themselves,” Parker says. “Supply is low, demand is high. That’s the main issue.”

Parker says she hears stories consistently now where real estate agents will take an ad for a flat down within an hour of posting it online, simply because there will already be 200 applicants within the first 20 minutes.

“If you are not online at the right time or you haven’t figured out a bot to apply for the right place at the right time, then you’re too late,” she says.

Flats in Berlin's city centre.

Flats in Berlin’s city centre. People relocating to the capital with a high enough budget often hire relocation firms to help find a flat amidst hundreds of fellow applicants. Photo: picture alliance/dpa/dpa-Zentralbild | Britta Pedersen

Parker says that if you have the money to spare, hiring a relocation firm may be a good idea. Many will also guarantee a certain number of viewings.

If you’re going it alone though, there’s still a few tricks you can use.

“Have a ready-to-go application package with all of your documents saved as one PDF and have it ready to go in the blink of an eye,” Parker advised, adding that your documents should be in German. “Have it saved on your phone so you can send it off with one click.”

Any relief in sight?

Unfortunately, flat seekers can expect the capital’s housing crisis to continue for quite some time.

Thomas Beyerle, a real estate professor and Managing Director of Catella Property Valuation, told the Germany in Focus podcast that the problem can only be fixed by increasing housing supply.

“Build, build, build,” he said. “The demand is definitely there.”

Beyerle says governments can certainly do a lot more to help address the problem, but rent brakes – like the one Berlin tried in 2020 before being overturned by the Federal Constitutional Court – won’t help.

“It totally failed,” He says, as it no longer became financially viable for some landlords to rent. “Over 40 percent of the listings online disappeared overnight.”

Instead, Beyerle says governments would do better to provide stimulus packages to help build housing, as skyrocketing inflation has made many construction materials increasingly unaffordable. He adds that demand is still rising, but supply is stagnating – but governments can help by putting in some relief money to help construction companies pay for materials – and thus more affordable housing.

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

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RENTING

Rents still rising fast in major German cities

Whether in a major metropolis or out in the suburbs, the pace of rent increases in Germany shows no sign of slowing down.

Rents still rising fast in major German cities

With the country in the grip of a worsening housing shortage, rents in Germany have continued to climb steeply in the first half of 2024 – in some cases showing increases in the double digits. That’s according to a recent survey of the housing market by property consultancy Jones Lang LaSalle (JLL). 

In the major cities, rents are still rising at above-average rates but have slowed down slightly compared to last year, JLL reported. 

According to the real estate experts, asking rents for flats in the eight major cities of Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart and Leipzig climbed by an average of 6.3 percent in the first half of the year compared to the same period last year.

In the second half of 2023, year-on-year growth was still at 8.2 percent.

However, there were huge discrepancies between different cities, with Berlin seeing rent hikes of 11.4 percent over the same period, compared to just 1.4 percent in Cologne. In Frankfurt, rents also jumped by 9.4 percent, while in previously affordable Leipzig rents shot up by 9.8 percent. 

READ ALSO: Major Berlin landlord set to increase rents by 15 percent

Outside of the major cities, rents are also going up at a much faster pace than before. Most strikingly, small and mid-sized German cities showed a significant spike in demand, with rents increasing by 8.3 percent in the first half of 2024 compared to 4.8 percent in the second half of last year. 

A less dramatic increase was seen in local communes, where rents rose by 5.6 percent this year compared to 5.5 percent in 2023. 

The study looked at the asking prices of 35,000 rental properties and 41,000 purchase properties around Germany during the first half of the year, compared to the same period last year.

Asking rents are the rents set by landlords for new tenants.

No sign of a slowdown

According to JLL, Germany’s overheated rental market shows no sign of cooling off in the near future. In recent years, the price hikes have largely been driven by the housing shortage and slow rates of construction, the analysts said. 

Since it came into government in 2021, the traffic-light coalition of the Social Democrats (SPD), Greens and Free Democrats (FDP) has been aiming to promote housebuilding with a range of measures.

Eyeing a target of 400,000 new homes a year, Housing Minister Klara Geywitz (SPD) has been working on plans to make it quicker and easier to build residential properties. However, the government has frequently missed its housing targets, blaming the difficult economic climate. 

A construction side in Frankfurt (Oder)

A construction site in Frankfurt (Oder). Photo: picture alliance/dpa | Patrick Pleul

Discussing the new measures, JLL expert Sören Gröbel said it would be a while before the impact was felt.

“From the supply side, the pressure on rents is therefore likely to remain high in the medium term,” he added.

Another major factor has been the current high interest rates, which have made purchasing a home on credit much more expensive.

READ ALSO: Why property prices in Germany are likely to rise this year

This has had a strong impact on the price of homes in Germany, with prices “correcting” over the past few years to compensate for higher mortgage rates. 

In the first half of the year, prices for owner-occupied flats in major cities continued to fall – albeit at a slower pace. On average, prices for new and existing properties fell by 3.6 percent in the first half of the year, compared to 7.4 percent last year. 

The decline was strongest in Frankfurt am Main (minus 6.5 percent), while prices hardly fell at all in Hamburg.

According to JLL, the combination of lower purchasing costs and higher rents are tipping the scales in favour of buyers again. 

“Due to the sharp rise in rental prices, the ratio between rental and purchase costs has also shifted slightly in favour of purchase costs again,” Gröbel said. 

“However, in view of the recent rise in interest rates, we can only expect a slow recovery in the market.” 

READ ALSO: How foreign residents in Germany are winning rent reductions

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