Rents are increasing in most major cities – but not in Berlin

BerlinWhile rents in most major German cities are expected to continue to rise in 2021 despite the corona pandemic, they will likely fall again in Berlin. This is the result of a rental price forecast by the Immowelt online portal for cities with more than 500,000 inhabitants.

By the end of the year, the asking rents for existing apartments will continue to rise in eleven of the 14 cities examined, i.e. the rents that are required in advertisements for existing apartments. The only cities examined in which the portal predicts falling asking rents are Hamburg (minus 1 percent) and Berlin (minus 5 percent).

While in Hamburg, according to Immowelt, the great new construction activity and “saturation effects” are noticeable, that is, the demand is slowly being met, in Berlin the rent cap regulates the prices downwards. As early as 2019 to 2020, the asking rents for existing apartments in Berlin fell by 8 percent, as an analysis by Immowelt from last year shows. After a further decline, according to the new forecast, the rent in Berlin will level off at 8.70 euros per square meter at the end of 2021. For comparison: Before the introduction of the rent cap, rents of 11.10 euros per square meter were still being charged.

Munich is by far ahead of all other major cities

However, the analysis also shows the side effects of the law: The proportion of cheaper existing apartments in the overall supply has fallen sharply, while the proportion of expensive new buildings that do not fall under the rent cap is increasing. It is presumed that landlords leave rental apartments empty until the Federal Constitutional Court has ruled, or prefer to convert them into condominiums and offer them for sale.

In Munich, Germany’s most expensive city, the initiative to stop rents last year was classified as inadmissible by the Constitutional Court. In the Isar metropolis, however, the price curve is flattening noticeably, according to Immowelt – albeit at a high level. After the enormous increases in recent years, asking rents for existing apartments are likely to go up by only 1 percent. At the end of the year, tenants then have to reckon with 16.10 euros per square meter. Despite the comparatively small increase, Munich is still far ahead of all other major cities at the end of 2021.

After Munich, Frankfurt follows in second place on the price scale. After a forecast increase of 3 percent, the price per square meter at the end of the year is 12.20 euros. Behind this, Stuttgart is “catching up” according to Immowelt. In the Swabian city, the strongest increase is forecast by the end of the year: The prices for existing apartments will then increase by 6 percent by the end of the year, so that the square meter will then probably cost 12.10 euros. In Düsseldorf, Cologne and Nuremberg (plus 4 percent each), further increases are also likely. An increase of 5 percent is also forecast for Leipzig. With prices per square meter of 6.80 euros at the end of 2021, the price level is significantly lower than in the western German cities.

“The interest in real estate is greater than ever before, the range – especially in the low-cost segment – is still manageable,” says Immowelt boss Cai-Nicolas Ziegler. “We therefore firmly assume that there will be no trend reversal this year either, although prices will no longer rise as strongly as in previous years.”

The price differences are also large for new buildings

According to Immowelt, the prices of the already expensive new buildings will be further decoupled from the existing properties in many cities in the course of the year. In Berlin, a rent increase of 6 percent is forecast, while the rents of existing apartments are falling. The square meter in a new apartment in Berlin then costs 13.20 euros. As with existing properties, the strongest increase in new buildings is likely to be in Stuttgart: Here Immowelt is expecting an increase of 7 percent by the end of the year. An increase of 5 percent was calculated for Dresden and Leipzig. The price differences are also large for new buildings: In Stuttgart, tenants of a new building pay 16.30 euros, in Munich (plus 3 percent) even 20.10 euros per square meter. In Leipzig it is just 8.80 euros per square meter. In many other cities, renting an existing apartment is already more expensive.

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