Germany’s housing market is squeezing residents, but pockets of affordability remain, particularly in the southwestern state of Baden-Württemberg. Finding a place to live in Germany is increasingly challenging and expensive, but a closer look reveals medium-sized cities offering comparatively lower rents.
Schwäbisch Gmünd and Villingen-Schwenningen stand out, boasting the largest selection of rental apartments priced under 12 euros per square meter. More than 67 percent of available apartments in these cities fell within that range in the latter half of 2025, according to a recent investigation by the IVD market research institute.
Affordable Options in Baden-Württemberg
These medium-sized cities in Baden-Württemberg offer a significant number of apartments for less than 12 euros per square meter:
- Schwäbisch Gmünd (70.8 percent)
- Villingen-Schwenningen (67.2 percent)
- Rastatt (57.6 percent)
- Göppingen (55.4 percent)
- Offenburg (48.6 percent)
- Aalen (47.1 percent)
- Baden-Baden (46.1 percent)
In contrast, cities with strong transport links to the state capital, Stuttgart, show significantly lower proportions of affordable rentals:
- Tübingen (11 percent)
- Böblingen (12.1 percent)
- Sindelfingen (12.8 percent)
- Ludwigsburg (14.2 percent)
- Waiblingen (20.7 percent)
“The potential for affordable rental apartments is manageable,” said Stephan Kippes, head of the IVD market research institute, particularly in the greater Stuttgart area. The increasing pressure on the housing market stems from population influx and evolving household structures, with a growing number of single-person households driving up demand.
What is the current state of rental prices in Germany? Nationwide, rental prices increased by an average of 4.5 percent at the end of 2025 compared to the previous year, reaching an average of 14.41 euros per square meter, according to a study by the Institute for the World Economy, which compiles the German Real-Estate-Index (GREIX). Munich remains the most expensive city, with tenants paying 23.35 euros per square meter, while Leipzig is the most affordable of the eight largest cities at 10.22 euros per square meter. Stuttgart ranks third among major cities, with an average rent of 16.11 euros.
“Too few apartments are being completed while demand, especially in large cities, remains very high,” explained Jonas Zdrzalek. Many tenants are also reluctant to move, as new apartments are often smaller for the same rent. The increase in Stuttgart’s rental costs over the past decade illustrates this trend: average rents rose from 12.30 euros per square meter in 2015 to 16.11 euros in 2025, an increase of nearly a third.
Here’s a look at rent increases in several cities over the past decade:
- Konstanz, 17.20 euros (plus 60 percent)
- Stuttgart, 16.11 euros (plus 31 percent)
- Böblingen, 17 euros (plus 48 percent)
- Ulm, 14.55 euros (plus 58 percent)
- Tübingen, 12.88 euros (plus 31 percent)
- Reutlingen, 11.90 euros (plus 33 percent)
- Göppingen 11.00 euros (plus 57 percent since 2017)
- Schwäbisch Gmünd 10.70 euros (plus 53 percent since 2017)
- Balingen, 9.10 euros (plus 15 percent)
The rising rental prices underscore a significant housing shortage in Germany, with a current deficit of 1.4 million apartments. Baden-Württemberg alone is short almost 200,000 apartments, according to a study by the Pestel Institutes on behalf of the Social Housing Alliance. “There is an incredible lack of housing in Germany,” said study leader Matthias Günther, adding that there are currently no signs of improvement, as building permits remain low.
Young people are particularly affected by the housing shortage, as high costs hinder their post-education life plans. Günther attributes the shortage to a lack of political focus on housing construction over the past 15 years, exacerbated by interest rate increases triggered by the war in Ukraine. “When it comes to new rentals in large cities, low-income earners and people in training and studies are increasingly likely to reach their limits,” Zdrzalek noted, potentially impacting skilled workers considering relocation to Germany.
“We are far from the numbers we would actually need,” Günther explained, stating that 350,000 to 400,000 new apartments are needed annually. Baden-Württemberg faces additional challenges, with some of the highest building land prices in the country, exceeding 1,000 euros per square meter, making affordable construction nearly impossible.
The number of apartment advertisements in the German Real Estate Index (GREIX) decreased by more than ten percent in the fourth quarter compared to the previous quarter, and by seven percent compared to the fourth quarter of 2024. “In a long-term comparison, the number of apartment advertisements for rent is currently around 20 percent below the level of 2015,” stated the Institute for the World Economy IfW. More than 17 percent of all advertisements in the fourth quarter were offers for short-term contracts and furnished apartments – a record high, with the proportion reaching almost a quarter in the eight largest cities and around a third in Munich.
