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RENTING

Over a million German households spend half of their income on rent

Over 15 percent of people in the country are spending at least 40 percent of their income on rent, according to the federal statistics agency.

housing germany
New housing being built in Gelsenkirchen. Photo: picture alliance/dpa | Fabian Strauch

Rent is taking up an increasing share of the average German paycheck, according to the Federal Statistics Office (Destatis).

The agency found that 3.1 million households in the country are spending at least 40 percent of their pay on rent, with about 1.5 million spending more than half their pay on cold rents. Cold rents in Germany typical don’t include utilities like heat and electricity, so total housing costs are even higher.

The average gross rent per square metre in Germany sat at €8.70 as of the end of 2022, although it is much higher in places like Berlin, Frankfurt – and especially Munich.

The increasing rent burden is particularly high on single-person households, people in larger German cities and people who moved into their current apartments after 2019. 

People living in smaller German cities are still paying, on average, much less than people in larger cities for rent. Inhabitants of cities of 20,000 people or less are spending around 26 percent of their income on rent, compared to the 27 to 29 percent seen in cities of over 100,000 people.

The burden on single people is particularly clear. They spend around a full third of their incomes on cold rents, as a nationwide average. That’s compared to couples or two-person households, whose rent equates to about a quarter of their income. 

For those who have newer rental contracts, the news is a bit more dire still – no matter where you live in the country.

Those who signed in 2019 or later are paying an average of €1.10 per square metre more than those who signed before. In larger cities, that difference is up to €1.40 per square metre, with people who moved in after 2019 in those cities paying an average of €11.00 per square metre on cold rent.

READ ALSO: Why Germany wants families to move to the countryside

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RENTING

Do rising rents make buying a home in Germany a better option?

Across Germany, rents have shot up in the last two years while property prices have fallen. Experts say this is making buying more attractive than renting at the moment.

Do rising rents make buying a home in Germany a better option?

For several years, property prices in Germany rose at a much faster pace than rents. Between 2016 and 2022, the average price for apartments climbed by a dramatic 76.5 percent, according to an analysis by real estate company ImmoScout 24. During the same period, rents for flats rose by 26.8 percent.

Experts said this was due to comparatively low interest rates and high buyer demand along with limited supply – all of which caused the property market to explode. 

However, this trend has reversed over the past two years, with rental prices rising significantly more than purchase prices.

According to ImmoScout, falling property prices is a big factor. The price index for apartments fell by 9.4 percent between 2022 and 2024, while rents rose on average by 11.7 percent, reducing the difference in price development from a peak of 39.2 percent in 2022 to 12.9 percent this year.

At the same time, the strong pressure on the rental market has resulted in a considerable financial burden for tenants. An earlier ImmoScout analysis from March showed that rental flats in Germany’s 40 largest cities received 21 times more enquiries than owner-occupied flats.

In another study released in summer, real estate experts Jones Lang LaSalle (JLL) found that 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 2024 compared to the same period last year.

READ ALSO: Rents still rising fast in major German cities

Real estate experts say it means buying a property in Germany has become more attractive.

“The sharp rise in rents in particular is making buying a property as an investment or home more and more attractive,” said Dr Gesa Crockford from ImmoScout. 

The index values for renting and buying have converged even more in Germany’s five largest cities – Berlin, Frankfurt, Hamburg, Cologne and Munich. 

Berlin prenzlauer Berg

Flats in the Berlin district of Prenzlauer Berg. Photo: picture alliance/dpa | Monika Skolimowska

The purchase price of existing flats rose by 65.5 percent between 2016 and 2021, while the rental price only increased by 21.6 percent. From the peak in 2021, prices for apartments have fallen by 2.1 percent, while rents have continued to rise by 28.9 percent. As a result, the gap in price development since 2016 has shrunk from 36.1 percent (2021) to 3.4 percent (2024).

People looking to rent in major cities are not only facing rising rents, but also fierce competition to snag an affordable place to live. 

“In the metropolises, buying has become increasingly worthwhile over the past two years,” said Crockford. “There, the difference between purchase and rental prices has levelled off from 30 percent and more to a low single-digit percentage range.”

Is it better to buy a home than rent?

Choosing to buy instead of renting is of course a personal decision and you have to consider several factors – including whether you can afford the mortgage and extra fees associated with house buying.

That said, property prices are expected to increase again slightly after the dip over the last two years.

READ ALSO: Is autumn 2024 the right time to buy a property in Germany?

However, it should also be noted that tenants rights are strong in Germany so renting can be a worthwhile and savvy way to go, if you can find a home that is affordable to you. 

That goes some way to explain why Germany has one of the lowest level of property ownership in the EU, with just over half of the population owning their own home.

Meanwhile, one study released in 2023 by credit insurer Allianz Trade found that buying property in Germany is “significantly more expensive than renting in Germany”.

Even if rents were raised by the legal maximum of 20 percent next year compared to 2023, the difference between average mortgage repayments and average rents would still come in at €381 per month, said the insurer. 

However, some buyers may consider a home an investment in the long term and rely on the value going up over time – though this, of course, is not guaranteed. 

READ ALSO: How the cost of renting in Germany compares to home ownership

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