Home & Living

Rental Growth Slowing a Bit

15.

April 2021

The upward trend of rents proceeded at breakneck speed in recent years. In some of Germany’s metropolises, rent rates have more than doubled. Now though, the latest edition of the F+B Rent Index shows that the extreme growth rates are beginning to level out. While the reference rents still rose by 2.2 percent between 2018 and 2019, the pace was down to 1.7 percent in 2020.

Here is another highlight: Even moving out of the city and into the suburbs is not necessarily cheaper. The top spot on the list of highest rents easily goes to the town of Karlsfeld, which straddles the city limits of Munich. With an index score of 153, it exceeds the national average by no less than 53 percentage points. Much the same is true for the Bavarian municipalities of Germering (144 points) and Dachau (139 points), which are also located inside Munich’s gravy belt, and whose rent levels are well above the average determined. (source: www.haufe.de).

Each index score quotes the latest local reference rents for standard flats. The presumed standard is defined as a flat of 65 square metres with normal interior fit-out in an average location. The basic index score of 100 represents the national average determined by the survey. For years, the Munich metro region has virtually been synonymous with above-average passing rents, always exceeding the German average by far. It was considered the priciest region anywhere in Germany for a long time. That said, another metro region in southern Germany is gradually evolving into a comparatively high-priced housing market: Stuttgart. With its reference rent of 10.38 euros per square metre, it is now the priciest German metropolis and markedly more expensive than cities like Munich (9.72 euros) or Hamburg (8.62 euros). Remarkably, the ten top spots of the F+B Rent Index are exclusively taken up by towns located inside the metro areas of Munich and Stuttgart.

East-West Gradient Remains in Place

Although rent rates in eastern Germany are gradually closing in on western levels, a visible gap remains. Major cities like Jena, Rostock and Brandenburg’s state capital of Potsdam placed in the ranks 100 through 95 of the F+B rent index and, with rent averages between 6.67 and 7.10 euros per square metre, more or less match the average rent level for Germany as a whole. The East German state capitals of Dresden, Erfurt and Schwerin are actually well below the German average still. The rents quoted here range from 6.17 to 6.68 euros per square metre. The most conspicuous price trends are reported from central and northern Germany. In 2020, passing rents here grew at an above-average pace for the third time in as many years: by 2.1 percent year on year in the north and 2.8 percent in the centre.

Rent Hikes after Period Building Refurbishments

It is generally safe to say in Germany: the newer a flat, the higher its rent will be. Especially in Berlin, long-term tenants in large housing estates pay comparatively low rent rates. Old lease agreements often specify sub-market rents, whereas new arrivals or tenants who recently relocated pay substantially more rent on new leases in Germany’s first city. But although new-build units are much more expensive, comparatively speaking, period building refurbishments and capital improvements will also trigger hefty rent hikes. Despite Berlin’s rent cap, which has been effective for over a year now, moving within the city can become a costly affair.

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