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. 

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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. 

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.

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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.” 

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