Rental prices developing faster than residential property prices

Good news for homeowners and landlords to start with: The risk of a bubble on the German residential real estate market has diminished. In recent years, residential property prices had developed so quickly that rental prices were barely able to keep pace. This had a negative impact on yields, with the result that some experts identified a risk of a bubble last year. According to brokers at JLL, asking rents in the top 8 cities rose by 6.3 percent year-on-year, while inflation in purchase prices was only 1.6 percent.

According to JLL's figures, Berlin stands out in particular. In the federal capital the average rent rose by 15.5 per cent to 16.00 euro per square meter and month. Leipzig and Hamburg were also able to record a large increase: In the Saxon metropolis there was a plus of 8.9 percent, while the Hanseatic city can show an increase in rents of seven percent.

However, the trend reversal is limited to a few regions, including Berlin, Hamburg and Leipzig. In Munich, Frankfurt am Main and Stuttgart, on the other hand, rents developed below average, and in the surrounding areas, prices even fell in some cases. The analysts believe that the reason why the rental housing market cannot be relieved in the long term is that too few new apartments are being built. It is also striking that asking prices in the major cities of Munich, Cologne and Frankfurt am Main fell slightly.

New construction is preferred

As a result of skyrocketing energy prices, rents including heating have also risen recently. As a result, there has been an increase in demand for energy-efficient, newly built apartments. This is also having an impact on the purchase prices of residential properties in major cities - these have risen as a result. Existing apartments, on the other hand, are currently less in demand. Immoscout24's residential barometer recorded a noticeable decline in contact requests for listings for existing residential property on the real estate platform for the fourth quarter of 2022. In parallel, demand for newly built apartments increased.

This applies in particular to major cities such as Berlin, Munich, Hamburg, Düsseldorf and Cologne. Outside of the large cities this development is to be felt accordingly less clearly. One of the striking figures is that the average price per square meter for existing apartments in Berlin fell slightly from EUR 11.49 to EUR 11.45 in the fourth quarter of 2022. Extremely unusual in the German capital, which is usually affected by strong rent increases.

Nevertheless, it is also evident, regardless of whether existing or new construction, that rents rose in the final quarter of 2022. According to Immoscout's residential barometer, the average rental price for existing properties climbed by one percent to €7.96 per square meter and for new builds by 0.3 percent to €10.88 per square meter. Accordingly, the situation was still different in the third quarter of 2022: Existing rental apartments recorded an increase of 2.9 percent and for new-build apartments it was 2.5 percent more. At 18.3 percent, ancillary costs accounted for just under a quarter of the total rent on average across Germany in December 2022.

Deadline for submitting property tax return has expired

On January 31, 2023, the deadline for submitting property tax returns expired for millions of owners. But not all owners submitted their returns on time - what does this mean for German residential property owners? First of all, the tax authorities of the federal states that are entrusted with collecting the property tax return can send a letter reminding them of the omission as well as setting a new deadline. In Baden-Württemberg, Bremen, Lower Saxony and Rhineland-Palatinate, for example, the relevant authorities have extended the deadline for their citizens until March 31, 2023. Owners will only be eligible for late payment surcharges and penalty payments after this new deadline has expired. The state of Bavaria is granting taxpayers as much time as the end of April.

Other German federal states are also sending letters to their citizens reminding them to submit their property tax returns. Whether and when penalties are to be expected, however, is not clearly regulated in these states. If the situation arises and fines are imposed, according to the German Tax Code, at least 25 euros can be due as a late payment for each month or part thereof. In addition, a penalty payment can be threatened, but this does not have to be paid if the declaration is made within the deadline. Such a penalty payment may not exceed 25,000 euros. However, the tax offices set the amount lower, at least in an initial threat, and are also based overall on what a citizen can afford.

If the tax return is not submitted at all, the tax office can issue an estimate. However, this does not extinguish the obligation to submit the return, nor does the tax office have to take back any fines imposed. This often has a negative effect on the owners, i.e. higher taxes are due. It is still possible to apply for an extension of the deadline, but the reasons for this must be clearly stated.

Deadline for landlords to provide information has also passed

Speaking of deadlines, legislators passed a new energy-saving ordinance last year requiring landlords to inform tenants about their energy consumption, energy costs and any potential savings. After the obligation to provide information already applied to October 31, 2022, landlords were still granted an extension of the deadline until the end of January.

This is now expired, as the non-profit consulting firm co2online explains. Altogether approximately one million multi-family houses, which have at least ten housing units and with district heating or gas are heated, are concerned by the obligation to inform - altogether it concerns approximately ten million dwellings. The aim of the measures is to encourage tenants to use energy more sparingly. To this end, landlords should have received specific measures from their energy suppliers and passed them on to tenants.