Analyze the real estate market - Renting in metropolises is increasing more slowly
The trend of rising apartment rents in metropolitan areas is weakening, according to an analysis by real estate specialist Jones Lang LaSalle (JLL), as reported by the German Press Agency. However, outside of metropolitan areas, the price increase for residential property ownership in the first half of the year has further accelerated.
According to JLL, the average rental increases for apartments in the eight metropolitan areas of Berlin, Hamburg, Munich, Cologne, Frankfurt, Dusseldorf, Stuttgart, and Leipzig were 6.3% higher in the first half of the year compared to the previous year. In the second half of 2023, the growth was 8.2%. The rates remained above average in the medium term, it was stated.
The largest increases were again recorded in Berlin, with an average of 11.4% in the first half of the year, where the upward pressure from very high levels is decreasing, followed by Leipzig (9.8%) and Frankfurt (9.4%). Only slight growth was observed in Cologne (1.4%).
Strong upward pressure in free cities
Outside of the eight largest cities, rental price growth is picking up speed. In other free cities, rental increases for apartments averaged 8.3% in the first half of 2024 - significantly more than the rate in the second half of 2023 (4.8%). In the districts, the increase was 5.6%, which was only slightly larger than in the second half of 2023 (5.5%).
Soren Grobel, JLL Research Expert for Residential Real Estate, commented on the driver of rents. "The pressure on rents from the stalling housing construction could also continue to push prices higher in the medium term."
For the study, around 35,000 rental and 41,000 purchase prices for new and existing buildings were evaluated. Rental prices do not yet represent concluded deals. Sometimes the agreed rent deviates, but less often than in real estate transactions.
Prices for property ownership fall less sharply
Unlike the rental market, the prices for residential property ownership in metropolitan areas continue to fall, albeit more slowly. On average, the prices for new and existing objects fell by 3.6% in the first half of the year - after 7.4% in the previous half-year. The largest decline was in Frankfurt with 6.5%, while prices in Hamburg hardly changed.
Higher wages paired with price corrections made conditions more attractive for purchasing residential property, noted JLL. "The strongly increased rental prices have shifted the relationship between rental and purchase costs slightly in favor of purchase costs." However, a quick recovery of prices is not in sight: "Given the recently increased financing interest rates, only a slow revival of the market for residential property ownership can be expected."
- Despite the weakening trend in Hamburg, apartment rents in major German cities like Berlin, Munich, and Cologne continue to rise, according to the analysis by Jones Lang LaSalle (JLL).
- Outside of metropolitan areas, the price increase for residential property ownership in Frankfurt am Main has slowed down compared to the previous year.
- Dusseldorf and Stuttgart also experienced a decrease in average rental increases for apartments in the first half of the year, contrasting the trend in metropolitan areas.
- Leipzig, another metropolitan area in Germany, saw a significant increase in apartment rents, with an average of 9.8% in the first half of the year.
- Real estate in free cities outside of the eight largest cities, such as Cologne, is experiencing an accelerated increase in rental prices, according to the German Press Agency's report.
- The real estate market in Leipzig and other free cities has shown consistent growth, with rental price increases in the districts slightly surpassing the rates in the previous half-year.
- The stalling of housing construction could contribute to further price increases in the rental market, as suggested by Soren Grobel, JLL Research Expert for Residential Real Estate.
- Despite the price corrections, higher wages have made purchasing residential property more attractive in Munich, where the relationship between rental and purchase costs has shifted in favor of purchase costs.
