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Surprisingly positive news from the real estate industry: rents in major German cities are falling. But the joy could be short-lived.
Berlin – In the third quarter of 2023, there was a slight relaxation in the rental markets of several major German cities. Rents for existing apartments fell in seven of the fourteen largest cities in Germany compared to the second quarter of the year. The largest decline was 2.6 percent. These findings come from the “Immowelt Mietkompass”, which was published on Monday (October 2nd). The starting point was a 75 square meter apartment with three rooms, built in the 1990s.
Current housing market: There will be a shortage of 1 million apartments by 2025
Overall, price developments have slowed significantly in the last three months. While eleven out of fourteen major cities recorded rising rents in the second quarter of 2023, prices have recently only increased in seven cities. Tenants appear to be increasingly reaching their financial limits, which may also be due to the sharp increase in the cost of living as a result of inflation.
“After the enormous increases in the past, rental price developments in several large cities have calmed down for the time being. However, given the dramatic slump in housing construction, the current price declines are probably just a short respite,” says Felix Kusch, Managing Director of Immowelt. “According to estimates from the housing industry, there could be a shortage of around one million apartments in Germany by 2025. If the federal government does not succeed in counteracting this, there will soon be a risk of significant rent increases again.”
Biggest declines in Frankfurt and Munich
Rents fell in the last quarter, especially in some expensive cities. The sharpest decline was recorded in Frankfurt am Main, where prices fell by 2.6 percent within three months. The average rent in the Main metropolis fell from 12.42 euros to 12.10 euros per square meter. After a decline of 0.4 percent in the previous quarter, Frankfurt has already recorded its second decline in a row.
In Munich, rents rose slightly in the second quarter. Now, however, the limit of price growth also appears to have been reached in the Bavarian capital for the time being. In the last three months, the average rent fell by 1.2 percent. This is the second largest decline after Frankfurt. Instead of 17.11 euros, tenants now have to pay an average of 16.90 euros per square meter for new rentals. The price level in Munich is still significantly higher than in any other major German city.
“In Munich and Frankfurt the price rally has come to an end for the time being. Apparently the high rents are currently no longer affordable for many people looking for an apartment,” continues Felix Kusch. “Nevertheless, there is some evidence to suggest that prices could rise again soon. “Demand pressure remains high in both cities.”
Relaxation in Berlin and Cologne, slight increases in Hamburg and Stuttgart
In Berlin, rents showed significant increases at the end of 2022 and beginning of 2023. However, price developments in the capital have also weakened recently. From July to September inclusive, the average rent fell by 0.4 percent to 11.44 euros. The capital is already recording its second decline in a row. After strong increases in the past, prices now appear to be stabilizing.
The price level in Cologne is slightly higher than in Berlin, where those looking for an apartment can currently expect to pay 11.98 euros per square meter. However, rents are also falling in the cathedral city. With a minus of 0.5 percent, the decline is even greater than in Berlin.
While the rental markets in Berlin and Cologne are experiencing a slowdown, rents in Hamburg have risen by 0.5 percent in the last three months. Those looking for an apartment in the Hanseatic city currently pay an average of 11.00 euros per square meter. Stuttgart also recorded a slight price increase in the third quarter. The average rent increased by 0.3 percent to 12.77 euros per square meter.
Strongest percentage increases in Nuremberg and Dortmund
Aside from the expensive hotspots, there is no consistent development. Rents have recently fallen in Düsseldorf (10.50 euros; -1.1 percent), Bremen (9.11 euros; -0.5 percent) and Hanover (8.90 euros; -0.1 percent). In Nuremberg, however, people looking for accommodation pay 1.2 percent more than in the previous quarter. This is the largest percentage increase of all cities surveyed. The current average price in the Franconian city is 10.32 euros per square meter.
View of the renovated old residential buildings in Berlin’s inner city district of Moabit. © Monika Skolimowska/dpa
Rents also rose in the cheaper cities in the third quarter. Dortmund (7.83 euros) even recorded the second strongest percentage increase within the analysis at 0.9 percent. In Essen (7.58 euros), however, the increase is lower at 0.2 percent. Rents have also recently increased in Dresden (7.78 euros) and Leipzig (7.38 euros) – the increase is 0.8 percent in each case. East Germany is becoming more and more attractive due to the increasing number of large companies settling there. In view of promising jobs, more and more skilled workers are moving to the major eastern German cities, which will lead to further rising rents in the future should lead.
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