Prices rise slower than inflation
Cheap Wolfsburg, expensive Rostock: That’s how much rents rose last year
Today, 05/15/2023 | 10:17
Stable rents have actually been a rarity in Germany for years, especially in large cities. But the energy crisis, rising interest rates and high inflation are also making themselves felt housing market noticeable. Rents in Wolfsburg rose by an average of just 0.23 percent last year. This is the result of the evaluation of the Postbank Housing Atlas 2023, which the Hamburg Institute for International Economics (HWWI) created. With 8.88 euros per square meter, the Autostadt is only slightly above the national average of 8.58 euros. The figure looks even better when we adjust it for the inflation rate of 6.9 percent. Then rents in Wolfsburg fell by as much as 6.7 percent.
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The Lower Saxony city is thus leading a quintet of four cities and one district in which rents fell by more than 6 percent last year, adjusted for inflation. Behind Wolfsburg are Suhl (Thuringia, -6.6 percent), Darmstadt (-6.2 percent), Frankfurt am Main and the district of Eichsfeld from Thuringia (-6.1 percent each).
Rents fall adjusted for inflation
The five regions are part of a major trend. Adjusted for inflation, rental prices fell from 2021 to 2022 in 365 of Germany’s 400 regions. But that only means that the rental price increase was less than 6.9 percent, which is not necessarily a reason for celebration. Tenants in Neumünster in Schleswig-Holstein and the district of Höxter in North Rhine-Westphalia, for whom the increase in rents is roughly in line with the inflation rate, should not be happy about this.
But: Compared to previous years, this is a change. In 2021, rental prices rose by an average of 4.9 percent and in 2020 by 2.7 percent. In both cases, this was significantly higher than the inflation rates of 3.1 and 0.5 percent. Last year, rent increases of 4.5 percent on average were well below the inflation rate of 6.9 percent, bucking the trend.
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But that’s just a national average. Just as rents in Wolfsburg, Darmstadt and Frankfurt increased only marginally even without adjusting for inflation, there is also the other end of the scale. There lies lonely and alone Rostock. The city near the Baltic Sea saw rents increase by 14.9 percent to €9.23 per square meter, putting it well above the national average for the first time. Even after deducting the inflation rate, that’s still an increase of 8 percent.
Such a value is not even remotely reached by any other German region. The next places are followed by the Eifelkreis Bitburg-Prüm in Rhineland-Palatinate with 10.7 percent (adjusted for inflation 3.8 percent) and the district of Märkisch-Oderland in Brandenburg with 10.2 percent (adjusted for inflation 3.3 percent). It is striking that there are comparatively few large cities among the regions with the highest rent increases. After Rostock, prices rose the most in Potsdam (9.4 percent), Berlin (9.3 percent) and Lübeck (8.1 percent). In contrast, rents rose more slowly than inflation in 47 of Germany’s 68 major cities, including six of the country’s top seven cities. Dusseldorf saw rent increases of 3.7 percent, Cologne 3.3 percent, Munich 3.0 percent, Hamburg 2.2 percent, Stuttgart 1.1 percent and Frankfurt just 0.8 percent as reported above.
Why are rents rising more slowly
There are several reasons for the slower rise in rents. Firstly, the purchase prices are no longer rising as sharply as in previous years. This is partly due to the fact that the interest rate hikes by the ECB have increased lending rates and thus the financing of a house purchase has become more expensive. In addition, the general demand for real estate has fallen due to high inflation. While rents aren’t always aligned with purchase prices, when the latter rise more slowly, homeowners also have less pressure to recoup money from high rents.
The second reason is that many tenants are reaching their limits as a result of the sharp rise in energy prices. If you sometimes have to pay twice as much for electricity and heating, you can’t also pay 10 percent more rent. According to experts, however, the high inflation is only reinforcing a trend that would probably have come about anyway. Increased construction activity in large cities, laws against excessive rent increases and lower levels of immigration to large cities are likely to mean that rents will hardly rise at all for years to come. Falling rents may be utopian, but if prices rise more slowly than wage levels, this alone would make apartments more affordable over time.
It is already certain that Munich will probably set a sad record this year. For 2022, the Bavarian state capital leads the rental price ranking with an average of 19.73 euros per square meter. Since it cannot be assumed that prices will suddenly fall this year, Munich should probably break the 20 euro mark. The catchment area of the metropolis is in second and third place. The district of Munich comes to 16.40 euros per square meter, the district of Starnberg to 15.05 euros. Frankfurt am Main is in 4th place with 14.84 euros.
Unsurprisingly, you can find the cheapest rental apartments in the eastern German countryside. The Saxon Vogtland district is the cheapest region in Germany at 5.08 euros. With the Thuringian district of Greiz (EUR 5.28), the district of Görlitz (EUR 5.35) and the Erzgebirge district (EUR 5.40, both Saxony), further areas in the new federal states follow.
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