Rents in Germany are Surging, Especially in Berlin
Rent rates in Berlin showed a 7.9-percent increase over prior-year period by midyear 2018. No other metropolis in Germany reported a steeper rent growth than its capital city. This is the upshot of the latest JLL analysis which examined the asking rents in the “Big Seven” cities and in Leipzig.1
However, the growth in Berlin has actually slowed. In the two previous years, rents in Berlin had increased by 12,8 percent and 9.1 percent, respectively. JLL also noted a slowing momentum in the rent performance in Düsseldorf, Cologne, Munich and Stuttgart. In the five cities just named, the averaged increase in 2018 was down to 4.9 percent after 7.1 percent during the prior-year period. The stagnation of rents was particularly obvious in Cologne (plus 0.4 percent) and Düsseldorf (plus 1.4 percent).
Leipzig Reporting Catch-up Effects
Although rents showed the fastest growth in Berlin, the capital continues to lag behind the other metropolises. Among the eight cities studied, Berlin only ranks fifth in terms of absolute rent rates with 11.65 euros per square metre. The highest rent rates were registered in Munich, but rates are also higher in Frankfurt, Stuttgart and Hamburg.
Leipzig once again made the record with a brisk performance as the average asking rent during the first half-year of 2018 crossed the mark of seven euros per square metre for the first time. The increase over prior-year period equals seven percent, making it the steepest rate aside from Berlin and Hamburg. The survey authors attribute the brisk growth to the catch-up effects that motivate the market action in Leipzig. They went on to elaborate that many flats in Saxony’s largest city are now refurbished while keen demand ensures moreover that the formerly high vacancy rate is dropping rapidly.
Unrelenting Strain on the Housing Market
According to the analysis, asking rents in these cities have been rising by 30 percent across the board over the past five years. The mean annual growth rate among the eight metropolises examined equals 5.3 percent. Berlin registered a particularly impressive five-year rent performance of 45.6 percent. Rents in Munich have gone up by roughly one third since 2013, but the growth has slowed substantially since then and was down to 2.9 percent in 2018. With the median asking rent in the Bavarian state capital now standing at 19.25 euros per square metre, the upside potential for continued rent hikes is rather low.
Overall, the survey noted a slowdown of growth rates after several years of soaring rents, and thus a gradual levelling of the rental trend. That being said, the survey authors added that the rent levels in many metropolises is now so high that the strain on the housing markets remains unrelieved for the time being. The only way to ease it, in their opinion, is to raise the completions figures.