Rents in major cities are no longer increasing as quickly as they have recently. According to a study, the situation is different in independent cities.
The trend towards sharply rising rents in major cities is weakening compared to the recent rapid growth. This is shown by an analysis by real estate specialist Jones Lang LaSalle (JLL), which was made available to the German Press Agency. Outside of the major cities, however, the price increase accelerated further in the first half of the year. While rents in Germany are rising overall, purchase prices for residential property in major cities are falling.
According to JLL, asking rents for apartments in the eight metropolises of Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart and Leipzig rose by an average of 6.3 percent in the first half of the year compared to the same period last year. In the second half of 2023, year-on-year growth was still 8.2 percent. In the medium-term trend, rates remained above average, it said.
According to the study, the largest increases in the first half of the year were again in Berlin with an average of 11.4 percent, where the upward pressure is decreasing from a very high level, followed by Leipzig (9.8 percent) and Frankfurt (9.4). Only a small increase was recorded in Cologne (1.4).
Great upward pressure in independent cities
Outside the eight largest cities, rental price growth is picking up speed. In the other independent cities, asking rents grew by an average of 8.3 percent in the first half of 2024 – significantly more than the rate in the second half of 2023 (4.8 percent). In the rural districts, the increase was 5.6 percent and was thus slightly larger than in the second half of 2023 (5.5 percent).
One driver of rents is the stagnating housing construction, said Sören Gröbel, JLL research expert for residential real estate. The extent to which political efforts such as the promotion of new construction and the planned building type E for simpler housing construction have had an effect will only become apparent after a while. “From the supply side, the pressure on rent prices is therefore likely to remain high in the medium term.”
For the study, around 35,000 rental and 41,000 purchase advertisements for new apartments and existing buildings were evaluated. Offered rents do not necessarily mean that a deal has been concluded. Sometimes the agreed rent differs, but less frequently than when buying property.
Purchase prices are no longer falling as sharply
Unlike the rental market, prices for condominiums in major cities continue to fall, albeit at a slower pace. On average, prices for new and existing properties fell by 3.6 percent in the first half of the year – after 7.4 percent in the previous half of the year. The decline was greatest in Frankfurt at 6.5 percent, while prices in Hamburg barely fell.
Higher wages coupled with price corrections have made conditions more attractive for purchasing residential property, noted JLL. “Due to the sharp rise in rental prices, the ratio between rental and purchase costs has also shifted somewhat in favor of purchase costs.” However, a rapid recovery in prices is not in sight: “In view of the recent rise in financing interest rates, only a slow recovery in the market for condominiums can be expected.”
Source: Stern
