Rental housing supply drops sharply
In Leipzig, the number of rental apartments has halved compared to two years ago. Especially in the largest German cities, the supply is becoming increasingly scarce. On the other hand, there are now many more apartments for sale.
The supply of rental apartments in Germany is significantly decreasing, according to a study. Compared to the beginning of 2022, 27 percent fewer rental apartments were offered in the seven largest German cities in the spring quarter, as reported by the employer-related Institute of the German Economy (IW Cologne) in its own evaluation.
The number of advertised rental apartments in Leipzig has halved the most. Nationwide, 18 percent fewer apartments were advertised than two years ago.
However, those who want to buy instead of rent have better chances, as the number of advertised owner-occupied apartments has increased by two-thirds compared to the beginning of 2022. The supply of single or two-family houses for sale has even doubled.
Buying is still very expensive
Nevertheless, demand remains cautious. The reason: purchase prices and financing costs are still relatively high. "The fact that potential buyers are holding back so much shows how great the financial burdens are for financing," said study author and IW real estate expert Pekka Sagner. "Housing must become more affordable - targeted state promotion is appropriate."
This would also relieve the rental market: those who would actually like to buy a home but cannot due to high financing costs are unintentionally occupying a rental apartment. Part of the solution is new construction, especially in metropolitan areas.
According to the figures, new contract rents in the second quarter (April to June) increased by 1.4 percent compared to the first quarter. If this trend continues, a medium rent increase of more than five percent is to be expected by 2024. The strong increase is "the symptom of increasing supply shortages on the rental apartment market".
Housing construction in metropolitan areas, particularly in large German cities, is crucial to alleviate the current housing supply shortage. The high demand for rentals and the subsequent increase in rental prices can be partially attributed to the scarcity of new housing units.
Given the rising rental prices and the financial burdens associated with home purchases, promoting new housing construction could incentivize more people to buy, thereby reducing pressure on the rental market.
