The demand for property to own is increasing again. For tenants, this results in moderate rent increases - but there is no end in sight to the rent increases in the long term.
Munich – The real estate market in Germany is showing signs of a turnaround. Compared to the first quarter of 2023, demand for condominiums has increased sharply this year. According to the current housing barometer from the
Immoscout24
portal,
interest in purchasing has increased, particularly in major cities.
“Compared to the previous year, interest in purchasing property has increased significantly – in major cities even by 49 percent,” explained ImmoScout24 managing director Gesa Crockford. In the areas surrounding the major German cities of Berlin, Hamburg, Düsseldorf, Frankfurt, Cologne, Leipzig, Stuttgart and Munich, demand increased by 31 percent. Interest rose by 39 percent in small and medium-sized cities and by 24 percent in rural areas.
Building interest rates have fallen again: lending is picking up speed
Real estate financiers are also observing increasing demand. The credit brokerage portal Interhyp announced that inquiries in the first quarter were higher than ever before. Since last fall, the building interest rate has fallen by 0.7 percentage points to a level of 3.5 percent, after climbing to a ten-year high in November 2023.
According to an analysis by Check24
, half of the credit institutions surveyed in the monthly Interhyp interest rate panel assume
that the interest rate will reach the three percent mark in the next six to twelve months. The other half is of the opinion that there will be fluctuations between 3.5 percent and four percent.
The prices for real estate are therefore slowly moving upwards again. Nationwide, the values for existing apartments rose by 0.6 percent compared to Q4 2023. The average price per square meter is now 2,490 euros. According to the Immoscout calculation, the highest increases can be seen in the cities of Cologne and Munich. In contrast, new apartments continue to experience a downward trend in price.
Increasing interest in buying real estate is having an impact on rental prices
Tenants can expect positive effects from the upcoming trend reversal. After a consistently strong upward trend until last year, the momentum is weakening as buying interest increases. “The rental market shows weaker price dynamics, but still shows high demand pressure,” concluded Crockford.
Compared to the same period last year, asking rents across Germany rose by 1.7 percent for existing apartments and by 1.6 percent for new buildings. In the cities of Berlin, Stuttgart, Leipzig and Düsseldorf, rents for new buildings rose only slightly or even fell. On the other hand, rental prices in Hamburg, Munich, Frankfurt and Cologne increased by up to four percent compared to the last quarter of 2023.
On average, the basic rent for a two-room apartment (70 square meters) in Germany costs 599 euros for an existing building and 833 euros for a new building. “While rents continue to rise in the future, the purchase market is becoming increasingly attractive again,” added Managing Director Crockford.
A lack of housing remains the main problem in terms of rental prices
“But the positive signs on the purchase market must not distract from the real problem: there is still a lack of apartments. “Therefore, more new construction is urgently needed,” she continued. Rental prices have experienced rapid development in recent times. Experts predict that this trend will continue. The housing shortage is the driving factor behind price developments on the rental market.
In addition, new construction is further inhibited by high interest rates and high construction costs. The environment is not economically attractive. Many property developers are in trouble, including Signa Holding most recently. Furthermore, city fees, rising energy costs due to CO₂ pricing and costs for energy-efficient renovations result in additional burdens that are reflected in the rents. There is also a lack of state funding.
The situation on the housing market is unlikely to ease - there is a shortage of up to 910,000 social housing units
Due to continued immigration, the situation will not ease in the future. The “Social Housing” alliance calculated a housing deficit of 910,000 social housing units and called for tax relief on new buildings and the provision of 50 billion euros for funding.
Current calculations by the research institute
Empirica
have corrected the number of housing shortages downwards to 170,000 - but only on the condition that construction is not carried out in the “wrong places”. Accordingly, the authors of the study wanted to differentiate in which regions there was a need for new construction. The analysis is based on demographic developments and the expected decline in population.