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Residential Rent Growth Despite COVID-19

German housing rents continued to increase unchecked even during the coronavirus crisis. The latest survey by the Immowelt real estate portal shows that new-tenancy rents kept climbing in most major German cities in 2020. The survey’s authors registered price hikes in 67 out of a total of 80 cities with populations of more than 100,000 residents.1

The upward trend is visible in all of Germany’s metropolises. New-tenancy rents increased by six percent each in Cologne and Düsseldorf, by five percent in Frankfurt am Main, by three percent in Hamburg and Stuttgart, and by two percent in Munich. Berlin presents a one-off situation because of the rent cap imposed by city hall. Rents for existing flats have become more affordable here, but supply in this segment is drying up, according to Immowelt. By contrast, rents for of new-build flats, which are exempt from the rent cap, have gone up considerably, so that Berlin still reported an average rent growth of five percent for all types of flats on the market.

Fast Growth Rates in the Greater Metro Regions

The Immowelt stats also reveal the great appeal of the metro regions. Rent rates in many of the cities grouped around the metropolises have been going up quickly. A good case in point is the highly sought-after Rhine-Main metro region around Frankfurt am Main. New-tenancy rents in Mainz and Offenbach, for instance, increased by five percent each.

Another example is the region around Stuttgart. Here, the survey determined a rent growth of twelve percent in Reutlingen and nine percent in Pforzheim, the fastest rent hikes among all of the cities studied. In Augsburg near Munich, new-tenancy rents rose by seven percent and therefore at a fast pace. Rent growth was also registered in East Germany. New-tenancy rents in the cities of Leipzig and Dresden, for example, went up by three percent each.

Higher Rents Make Homeownership More Attractive

The rise in residential rent rates simultaneously raises the appeal of condominiums. The 2020 ACCENTRO-IW Housing Cost Report already documented for Germany as a whole that occupying a condominium is 48.5 percent more affordable on average than living in a comparable rental flat. In the Big-7 metropolises, too, owner-occupiers boasted a cost advantage over tenants that ranged from 35.1 percent in Berlin to 59.5 percent in Cologne.2

Residential rent growth will moreover translate into potential revenue increases for landlords. This makes condominiums attractive not just for owner-occupancy but also as private buy-to-let investments.