2023-09-12 06:23:53
Housing costs continue to rise in cities in Germany. According to a new analysis, rents in the 50 largest cities increased on average by 2 percent in existing buildings and by 4 percent in new buildings in the first half of the year. In the seven largest cities of Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf there was an increase of four percent in existing buildings and six percent in new buildings. This emerges from the residential report “Residential Investment – Residential and Commercial Buildings at a Glance”, which the real estate service provider Colliers plans to publish on Tuesday and which is available to the FAZ in advance.
Jan Hauser
Editor in business, responsible for real estate.
The authors expect rents to continue to rise in the future. They cite the lack of new buildings in sought-after neighborhoods and the influx into urban areas as the reason for this. Colliers managing director Felix von Saucken says that the misery of the housing shortage due to too little new construction is rightly being complained about a lot.
“The demographic megatrend of the constantly increasing number of households is often ignored,” he says, who heads the housing division in Germany for the real estate company. It is precisely the combination of too few apartments and more households that is causing the drama on the housing market. In addition, rental offers in the 50 largest cities have fallen by 31 percent since last year and by 36 percent in the seven largest cities.
Immigration and more single-person households
However, the desire for living space is growing: According to the report, more than 500,000 new households are expected to be created in the 50 largest cities in Germany by 2035. This is due to the long-term trend that the number of single-person households and the rented space per person will continue to rise on average in society. This means that demand in popular regions is constantly increasing. The population in Germany also increased by 1.1 million people to around 84.4 million people last year due to refugees from Ukraine.
In Germany, around 300,000 new apartments have recently been added every year. In order to better meet demand, the federal government has set itself the goal of 400,000 new apartments per year. This will be difficult to maintain. Colliers expects 245,000 new homes to be built this year. Other estimates also assume a falling number of new buildings – also because the number of building permits fell by around 30 percent in the first half of the year due to a change in interest rates and rising costs.
With this shift in the real estate market, property prices have reduced. However, there is some reluctance in the business, the number of transactions has fallen and some owners are still waiting for a price increase to sell. According to Colliers’ calculations, the average prices for purchases of larger residential and commercial buildings in 52 cities fell by an average of 17 percent last year.
The bottom line should now be reached: As the housing shortage worsens due to the lack of new construction, rents in existing buildings would inevitably rise. For Felix von Saucken, this prospect of rental growth speaks against a further fall in purchase prices. “The bottom has been reached in many places,” he says. “Prospective buyers can buy again with a clear conscience if they are convinced of the qualities of an object.”
The returns for residential and commercial buildings, also known as apartment buildings, have now improved. According to the report, net initial yields here in Germany have risen from 3.9 percent last year to currently 4.5 percent. In the seven largest cities there was an increase from 3.0 percent to the current 3.8 percent. Anyone who rents out an apartment building often benefits from increased rents.
Rent burden increases significantly
Rents have increased, especially in new buildings, as they are generally less limited by government regulations. According to the analysis, in the seven largest cities in Germany, residential rents have increased by an average of around 55 percent over the past ten years, while the average household income rose by around 32 percent.
The share of housing costs in income has tended to increase: the correlation between residential rent and household income results in a rent burden rate of around 30 percent on average for 2022, after around 25 percent in 2012 for an apartment with 95 square meters when rented out and without additional costs. Von Saucken sees this as reasonable.
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There will certainly be deviations from this on the real estate market – upwards and downwards. The amount of rent also varies within the cities. Those who live in an apartment for longer should generally experience less stress.
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