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Real Estate News - May 2024

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31.

May 2024

Bulwiengesa study: Completion of more than 200,000 apartments delayed

The housing shortage in Germany is serious - and there is no easing of the situation in sight. This is shown by the results of the recently published Bulwiengesa study “Residential Developments in Germany”. As the authors of the study report, the completion of more than 200,000 apartments is being delayed, with the start of construction delayed in 34 percent of all residential construction projects. Significantly fewer apartments are still being built than are needed: Between 2013 and 2023, for example, around 260,000 apartments were completed each year - but the demand is around 400,000 apartments per year. Another problem is that the housing shortage is greatest in cities, but more than 50 percent of newly built apartments are being built in rural areas.

Bulwiengesa has examined housing demand in A, B, C and D cities as well as in rural areas and analyzed housing development up to 2040 based on population figures, building completions and completions. The result: the demand up to 2028 is around 420,000 apartments per year. Rising population figures are exacerbating the housing shortage: between 2013 and 2023, the population in Germany will grow by 8 percent to currently around 84 million people. For the year 2040, the authors of the study expect population growth of 0.5 percent, with growth of 5.6 percent expected in the seven A-cities. According to the authors, rents will also rise as a result of the housing shortage.

German Economic Institute (IW): Rents rising at an above-average rate

Residential rents in Germany are rising at an above-average rate. This was reported by the German Economic Institute (IW). According to the report, residential rents in the first quarter of 2024 are developing very differently to purchase prices, which are still falling in a year-on-year comparison (first quarter of 2023) but remain stable in a quarter-on-quarter comparison (fourth quarter of 2023). According to the latest housing index published by the German Economic Institute (IW), advertised new contract rents have risen by 5.3% within a year, twice as much as in 2019. Compared to the previous quarter, there was a clear increase of 1.5%. Economists see the housing shortage as one of the main reasons for rising rents.

According to the IW, the strongest rent increases are in the major cities and their surrounding areas. In the “top 7” (Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart), advertised new contract rents rose by three percent in the first quarter of 2024 compared to the fourth quarter of 2023. But rents are also rising in rural areas. At 4.6 percent, rents there rose only slightly less than in the rural districts directly adjacent to one of the top 7 cities, where rents increased by 5.1 percent compared to the same quarter of the previous year, according to the report.

In mid-April 2024, the traffic light coalition agreed to extend the rent freeze until 2029. Meanwhile, the SPD is discussing an extension of the rent freeze to new builds and furnished apartments.

Analysis by ImmoScout shows: Large apartments and old houses in demand in the city

According to an analysis by ImmoScout24, spacious condominiums in German cities are currently selling particularly well. The results of the analysis show that demand for residential real estate has been rising continuously since November 2023, while supply is falling. Apartments in the major metropolitan regions are in particularly high demand: In the first quarter of 2024, the eight largest German metropolitan areas (Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Leipzig, Munich, Stuttgart) accounted for 38 percent of condominiums sold - an increase of five percentage points compared to 2022. Apartments in the areas surrounding the metropolitan areas account for 26 percent of sales, followed by apartments in rural areas at 19 percent, albeit with a slight decrease of one percentage point compared to 2022. Single-family homes in rural areas are still the most frequently sold, accounting for 41%, but their share has fallen by 6 percentage points in a two-year comparison. In contrast, single-family homes in urban areas are becoming increasingly popular.

According to ImmoScout24, two- to three-bedroom apartments with 51 to 80 square meters of living space account for the majority of sales, although it is noticeable that more spacious apartments with over 120 square meters were sold. These large apartments roughly correspond to the living space of the most frequently sold single-family homes with 101 to 150 square meters, which accounted for 38 percent of sales. Very large apartments over 250 square meters lost 2.5 percentage points in a two-year comparison.

Ruling of the Berlin Regional Court: Lack of housing justifies hardship case

A recent ruling by the Berlin Regional Court could have an impact on the law on termination for personal use. The case: A landlady in Berlin had terminated a tenant's lease for personal use because she wanted to use the apartment he occupied herself. She justified the termination by stating that she needed the apartment to work in a restaurant in which she had acquired shares. The tenant objected to the termination on the grounds that he could not find suitable alternative accommodation in Berlin due to the tight housing market. The landlady then sued him to evict him from the apartment.

The Berlin-Mitte district court initially dismissed the action as the termination was not formally justified. On appeal, the Regional Court of Berlin II initially deemed the termination for personal use to be formally valid. The landlord had duly justified the termination and actually needed the apartment in accordance with Section 573 (2) No. 2 BGB. Nevertheless, the court dismissed the action for eviction as unfounded and ordered the landlady to continue the tenancy for a period of two years. The judges based their decision on the fact that the termination of the tenancy constituted unreasonable hardship for the tenant. Due to his limited financial means, it was not possible for him to find suitable alternative accommodation. The tenant had proven this by unsuccessfully applying for 244 vacant apartments in Berlin and the surrounding area over a period of two years and eight months.

The judges also noted that the housing market in Berlin was extremely tight: the vacancy rate was only 0.3 percent. Added to this is the strong population growth and the fact that the stock of social housing in the capital is decreasing and only a few new apartments are being built. According to the Berlin-Brandenburg Statistical Office, 3,770,699 people were living in Berlin at the end of June 2023. This means that the population increased by 15,448 people or 0.4 percent in the first half of the year. Immigration was particularly high in 2022, when - partly due to the war in Ukraine - almost 85,000 people moved to Berlin.

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