IW Analysis: Asking Rents in Germany Rise by Four Percent in Second Quarter

IW real estate economist Pekka Sagner sees the main driver of the tightness in a distortion of the market caused by existing rental contracts. "Viele Menschen verblieben in Wohnungen, die nicht zu ihrer Lebenssituation passten und zu groß oder zu klein seien, weil sie ihre günstigen Mieten nicht aufgeben wollten", Sagner explained.

Fewer Rental Listings in the Major Cities

At the same time, the supply of rental apartments is shrinking noticeably. Nationwide, the number of listings is almost 12 percent below the level at the beginning of 2022, according to IW figures. The decline is particularly pronounced in the metropolises.

In Hamburg, for example, the rental supply has more than halved compared with spring 2022; "In Hamburg wurde das Mietangebot mehr als halbiert", according to the IW. In Frankfurt am Main, the number of listings is 43 percent below the level from early 2022, according to the data.

On the sales market, by contrast, supply is expanding noticeably. Compared with the first quarter of 2022, almost twice as many owner-occupied apartments are being offered for sale nationwide; the number of listed single- and two-family homes is "rund 140 Prozent" above the level at that time, according to the evaluation.

Sales Market with Growing Supply

Prices for owner-occupied apartments and for single- and two-family homes rose by 0.8 percent nationwide compared with the prior-year quarter. Sagner sees weaker demand as the main factor behind the growing supply of properties for sale. "Die Ausweitung ist vor allem Ausdruck der gesunkenen Nachfrage und längerer Vermarktungszeiten, nicht einer entsprechend starken Zunahme des Wohnungsbestands", the IW economist said.

Regionally, price movements on the sales market vary considerably. In Munich, for example, prices "gingen sie um 1,9 Prozent zurück" – the IW data thus show a slight decline in purchase prices compared with the prior-year quarter. Sagner likewise interprets the growing supply of properties for sale as a sign of cautious buyers and longer marketing periods, rather than as an indication of an actually growing housing stock.

Rent Increases Across the Board

The divergent developments coincide: while rents are rising and rental supply is becoming scarcer in many major cities, sellers on the ownership market are losing momentum. The IW does not see this as a relaxation of the housing markets for the time being, but rather as a shift between the two segments.

Overall, the picture of a tight housing market persists: rising asking rents, declining rental supply in the metropolises, and a growing stock of sales listings, whose price momentum has at the same time slowed significantly.

In large cities outside the biggest metropolises, the rent increase of 4.9 percent in the second quarter is the central figure in the IW evaluation. It underscores that the pressure on rents is not limited to the well-known top locations of Munich, Hamburg, Frankfurt, or Cologne, but is intensifying across major cities as a whole.