The rise in residential rents in Germany has accelerated again after a phase of relatively moderate growth. According to data from the German Economic Institute (IW), asking rents rose sharply on average by 5.8 percent in the third quarter compared to the same quarter of the previous year. That was more than the average for the third quarter of the past three years (plus 4.5 percent). In all federal states, growth exceeded the medium-term trend.

“It shows that the momentum is increasing,” said IW real estate expert Michael Voigtländer. People were increasingly looking for rental accommodation, while some landlords were charging higher rents, apparently because of high inflation. In addition, there are catch-up effects in rural regions that still offer comparatively cheap housing.

Among the federal states, asking rents rose the least in Baden-Württemberg, Saxony and Hesse, at a good 4 percent compared to the same quarter of the previous year. They climbed the strongest in Saarland (plus 7.9 percent), in Brandenburg (9.1 percent) and Mecklenburg-Western Pomerania (10.3 percent). The annual comparison of asking rents was based on almost 1.5 million advertisements on major real estate portals. The asking rents do not yet mean any deals, but show the direction on the market. Also, rents can rarely be negotiated.

metropolises at a very high level

In the metropolises, there were relatively moderate increases in asking rents in Frankfurt (plus 1.4 percent compared to the same quarter of the previous year), Stuttgart (2.4 percent) and Munich (3.5 percent). On the other hand, asking rents in Düsseldorf (5.9 percent), Leipzig (7.8 percent) and Berlin (8.3 percent) increased in particular. “In the very expensive cities, the growth is lower – probably due to a lack of solvency,” said Voigtländer. After years of the real estate boom, rents in the major cities have already reached a very high level.

Higher lending rates, high construction prices and record inflation are making home ownership less affordable. Interest rates on ten-year real estate loans have more than tripled since the beginning of the year. Many people are therefore switching to the rental market. The shifting demand will increase the upward pressure on rents there, according to a recent study by Landesbank Helaba.

Recently, DZ Bank and the Association of German Pfandbrief Banks (vdp) have observed that rents under new contracts have risen more sharply with growth of around five percent over the year. The reason for the “noticeably increasing rents” is not only the shift in demand but also the increasing immigration with many refugees from Ukraine, according to DZ Bank. A high demand for affordable housing meets falling vacancies in the cities.