Increase in rents, subsequent rise in property values.
It's no secret that the affordability issue in German housing is a well-known fact. After a brief pause, property prices generally tend to escalate again, and unfortunately, the news on rents isn't any better. Recent analysis indicates a rise in both rents and property prices across Germany.
Unsurprisingly, the rise in rents is a result of the persistent shortage of apartments due to insufficient new construction. This shortage is particularly noticeable in the increase in offer rents in major and mid-sized cities, with a 12% surge in demand for existing apartments in the third quarter of 2024, significantly outpacing the growth in new construction (2%). In metropolitan areas, the demand for rental apartments remains high, albeit at a slower pace with a 7% increase.
The growth in demand is more pronounced in the outskirts of metropolitan areas (12%) and significantly in independent cities (17%). In rural areas, demand for rental apartments has risen by 9% compared to the previous quarter.
Berlin joins the top three most expensive metropolitan areas
Just like Frankfurt am Main, rents in Berlin have risen by 3.1%. As a result, Berlin now charges 14.19 euros per square meter, placing it third in the list of most expensive metropolitan areas, trailing behind Frankfurt am Main (14.97 euros) and Munich (20.97 euros). Berlin's average rent prices have surpassed those in Cologne (14.04 euros) and Stuttgart (14.07 euros), despite a slight decrease of 0.5% in both cities.
The average rent for existing apartments in Germany is 8.54 euros per square meter, showing a stagnant development of -0.2% in the third quarter. The rent growth for existing apartments in metropolitan areas is diverse. Rents for existing apartments are increasing significantly in Düsseldorf (3.6%) and Leipzig (3.7%), but the average rent in these cities remains below the German average.
Conversely, rents for new apartments continue to rise. The average rent for new apartments in Germany has increased by 1.2% to 12.37 euros per square meter in the third quarter. Berlin also leads the way with a 3.3% increase in the quarterly comparison, setting a new price record of 20.16 euros per square meter in the city, only second to Munich (25.58 euros per square meter).
Frankfurt am Main completes the trio of the most expensive cities with a square meter rent of 18.09 euros (1% rise). Leipzig has seen a substantial increase in new rents, which have risen by 3.6% to 12.61 euros per square meter since the previous quarter. New rents have also increased substantially in Cologne (2.3%) and Hamburg (0.5%).
Counterintuitively, property ownership also tends to grow more expensive
Despite the price increases, those considering purchasing their own property often find themselves needing to invest more money. According to the Immoscout 24 Wohnbarometer, both prices for apartments and single-family houses in new construction and existing properties remain stable. Lower interest rates contribute to boosting the purchase market. After a temporary lull in the summer, demand for purchases has seen a clear surge since September. According to the Immoscout 24 Wohnbarometer, the asking price for residential property, in the form of apartments, has also risen in the first quarter. Nationwide, this increased by up to 2.3% for existing and new construction properties, following a 10% decrease in the fourth quarter of 2022.
Existing Apartments
On average, asking prices for existing apartments increased by 1.5% in the third quarter. In Stuttgart and Düsseldorf, prices rose by 1.4% and 2%, respectively, within a quarter. In the other six major cities, prices remained relatively unchanged compared to the previous quarter, indicating market stabilization: While Berlin (down 0.1%), Cologne (down 0.1%), and Hamburg (down 0.4%) saw slight decreases, Leipzig (up 0.3%), Munich (up 0.7%), and Frankfurt am Main (up 0.7%) showed slight increases.
Year-over-year, the upward trend is confirmed: In Cologne, prices have increased by 5% compared to the previous year. In Munich, an existing apartment costs 4.4% more than a year ago, with the square meter price approaching the 8500 Euro mark. Only in Frankfurt am Main are prices still slightly below the previous year, at -1.3%.
New Apartments
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Basket prices for freshly constructed flats remained about the same in the third quarter, both nationally (up 0.2%) and in major urban areas. Stuttgart experienced a slight drop of 0.6%, while Frankfurt am Main and Düsseldorf followed suit with a decline of 0.5%. Positive developments ranged from a 0.1% increase in Hamburg to a 0.6% uptick in Munich. Comparatively, four out of eight major cities showed substantial price hikes for the year: Apartments in Munich (up 5.5%), Berlin (up 5.2%), Cologne (up 3.1%), and Leipzig (up 2.4%) now cost more than they did the previous year. On the other hand, house hunters in Frankfurt am Main (down 2.2%), Stuttgart (down 1.7%), and Düsseldorf (down 1.6%) can still save some dough compared to the same quarter last year.
Existing Dwellings
Housing prices in Leipzig went up by 2.2%, followed by Cologne at 1.8%, Hamburg at 1.6%, and Stuttgart at 1.3%. Frankfurt am Main saw a price decline of 1%. In other parts of the country, quarterly price changes remain minimal. The national average price also took a hit, dropping by 0.4%. For the year, prices in Stuttgart and Cologne surged over 6% compared to the previous year due to favorable quarterly fluctuations. Leipzig experienced a price hike of 2.9% for the year. However, prices in Munich (down 2.0%), Frankfurt am Main (down 1.6%), and Hamburg (down 1.4%) are slightly lower than a year ago.
Newly Constructed Single-Family Homes
Compared to the previous quarter, nationwide prices for newly built single-family homes increased by 2.1%. Similar trends can be seen in three major cities. In Stuttgart, prices went up by 2.3%, while Berlin and Hamburg witnessed a 1.2% price rise each. In the remaining five cities, prices are generally on par with the previous quarter or have seen slight reductions, like in Munich and Frankfurt am Main, with a drop of 0.9%.
Looking at the entire year, five out of eight major cities boast prices above the previous year's mark. Stuttgart had the biggest increase with 8.9%. Berlin and Leipzig both saw a 3.6% price hike, while Cologne experienced a 2.0% increase and Munich observed a 1.1% increase. However, Hamburg saw a decrease of 2.9%, and Düsseldorf saw a decrease of 2.4%.
The rise in demand for rental apartments has led to an increase in offer rents, with a significant surge of 12% in major and mid-sized cities in the third quarter of 2024. Due to this demand, the average interest rate for obtaining a mortgage to buy property may also increase, making homeownership more expensive for many individuals.
