Rising rents due to changes in the real estate market

The strong change in the real estate market is particularly noticeable in rents. Expensive rents, increased ancillary costs and a lack of affordable housing characterise the current situation. Several factors have influenced these changes. The purchase of residential property is a good option despite high interest rates.

In many German cities, rents have risen sharply following the abrupt turnaround in the real estate market. Especially in conurbations such as Berlin, Hamburg, Munich and other major cities, the demand for housing has increased while the supply has decreased.

The lack of affordable housing is a major problem that should actually be countered by forced new construction. But the changed financing conditions with sharply increased interest rates have had the opposite effect. From January to April 2023, the number of building permits for new construction fell by 33.5 percent for single-family houses, 52.1 percent for two-family houses and 27.1 percent for multi-family houses.

According to calculations by the ifo Institute, around 245,000 flats will be completed in new residential buildings in 2023 and 210,000 next year. The federal government's target, on the other hand, is 400,000.

Due to rising rents and the lack of affordable housing, some German cities have taken measures to regulate the rental market. For example, the Mietpreisbremse (rent brake) was introduced in some cities to limit excessive rent increases.

Some flat providers are trying to counteract excessive regulation. For example, at the same time as the rent brake was tightened, the number of furnished flats on offer in Berlin and Hamburg increased significantly. This is shown by an evaluation of the QUIS database. Anyone who rents out a furnished flat can charge a surcharge for it, which does not have to be shown separately.

According to the Accentro Housing Cost Report in cooperation with the Institut der deutschen Wirtschaft (IW), in 2022 it was cheaper to buy an owner-occupied property than to rent in 328 of 401 districts and independent cities. The cost advantage was on average eight percent.

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