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HOUSING

Rising rents and stiff competition: What you need to know about Germany’s housing market

Long queues at apartment viewings, extensive application documents and lots of rejections. Let’s face it: good apartments that aren’t too expensive are difficult to secure in Germany.

Published: 20 September 2018 10:50 CEST
Rising rents and stiff competition: What you need to know about Germany's housing market
A demonstrator carrying an 'apartments for all' placard at a demonstration against rising rents in Hamburg. Photo: DPA

But now the federal government has recognized the problem and has called a housing summit.

At the residential summit happening this Friday in Berlin, different housing and building organizations will join politicians to discuss these problems together. On Thursday a meeting is also taking place between trade unions, social associations and tenants’ federations.

Why is it so difficult in the housing market?

It’s hard because there is a huge regional demand – and not just in metropolitan areas. Living space is now lacking in one-third of all German districts and cities, according to the evaluation institute Prognos which carried out an investigation in June 2017.

Due to that, the situation in 138 of 402 German cities and districts is problematic. The housing market in Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart is particularly tense.

The bottom line, and perhaps surprisingly, is that there are even more apartments than a few years ago: in 2010, there were 495 apartments per 1,000 inhabitants, while last year there were 12 apartments more.

At the same time, the apartments are getting bigger: the average area per person has increased by 1.5 square meters in seven years. Although it should be noted that many people, especially in cities, are having to accept smaller apartments due to costs. 

How are rents in Germany developing?

They are only going in one direction and that is up: In 2017, rents for new contracts rose by 4.5 percent compared to the same period in the previous year. The price increase slowed slightly compared to 2016 (from 4.9 percent).

On average, tenants paid €7.99 per square meter, according to the Federal Institute for Building, Urban and Spatial Research (BSSR). However, it was not the hard-to-find actual rental prices that were evaluated, but asking rents, for example the prices landlords require for advertisements.

Construction work on housing in Hamburg. Photo: DPA

Where is the situation particularly bad?

The most expensive apartments were advertised in Munich, with an average of €16.65 per square meter. It was followed in second place by Frankfurt am Main (€13.09) and Stuttgart (€12.62).

If you are looking for a cheap apartment, you have to move into the country: in the regions of Wunsiedel (Bavaria), Vogtlandkreis (Saxony), Holzminden and Lüchow-Dannenberg (Lower Saxony), apartments were offered for less than €4.50 per square meter.

View of housing in Berlin. Photo: DPA

And do people go to the countryside?

It seems people would like to. “If the Germans had a choice regardless of their financial situation, they would most like to live in a small rural community,” notes the Federal Foundation for Building Culture in a study published at the end of 2016.

However, very few people follow the call of the country. Above all, “artists, designers and cultural workers” deliberately opted for a move. On a large scale, people do not move to the countryside.

According to an evaluation by the BBSR, between 2010 and 2016 large cities and their surrounding areas grew. In contrast, sparsely populated districts away from metropolitan areas lost inhabitants.

What is the Federal Government doing to alleviate the housing shortage?

There is a whole range of projects: The Baukindergeld is intended to make it easier for families with one or more children in the household to build their first new home or buy real estate. Through the programme, families can receive a subsidy of €12 per child per year over ten years.

The brake on rental prices prohibits landlords from re-letting a property at more than ten percent above the local comparable rental demand. The SPD wants to go further and says that existing rents should only be allowed to rise for a period of five years in parallel with inflation.

An extra tax bonus should lead investors to build affordable housing. In addition, two billion euros in federal funds for social housing are planned. The CDU/CSU and SPD have set a target of 1.5 million new homes in the next few years.

Does that help?

Trade unions, social organizations and tenants' association say “that the federal government is unwilling or unable to seriously redirect and make a policy for tenants and apartment seekers”.

The alliance behind the Alternative Residential Summit which is taking place this Thursday in Berlin says there is a housing crisis in Germany. Under the banner and hashtag 'Mietenwahnsinn' – rent madness – they are calling for, among other things, sharper brakes put on rental prices and to lower regular rent increases “drastically”.

They also want to “stop forced evictions” and improve the protection of residents against evictions. The group is also demanding regulated land prices and land use, and that public land should no longer simply be sold to the highest bidder.

Scaffolding on an apartment building in Prenzlauer Berg, Berlin. Photo: DPA

What does the industry say?

Associations often criticize that many incentives for the construction industry are only planned for a few years and not in the long term. It's too early to tell if a a serious increase in investment will take place.

“Increasing land prices and tax rates, strict usage requirements, lengthy planning permission and planning procedures are the big enemy of affordable new building,” says Andreas Mattner, president of the Central Real Estate Committee. The association calls for simplified construction law, with type approvals for houses at the federal level and tax relief.

Should you be buying an apartment or a house now?

Anyone taking out a loan can benefit from favourable interest rates. On the other hand, there is a strong demand for apartments, which drives up prices.

In the end, buying a property depends above all on personal factors. Buyers should divide the purchase price by the annual ‘cold rent’ (without bills added on) and calculate how many years the purchase pays off.

Buying can be better than renting, says Jörg Sahr, editor of the journal Finanztest. That's provided that buyers bring to their project at least 20 percent equity, and pay back their loan over 30 years with more than two percent, he says.

SEE ALSO: Renting in Germany – what you need to know

See ALSO: Where in Germany it now pays to buy a home instead of renting

A potential risk factor: at the moment, loans are cheap, but usually buyers rarely finance the entire price of a single loan. In the case of a follow-up loan, higher interest rates could be due in the future. Consumer advocates therefore recommend loans with a long-term fixed interest rate.

'Affordable rent instead of fat returns'. A demonstration against rising rents in Berlin. Photo: DPA

Who actually rents apartments in Germany?

At the end of last year, there were just under 42 million homes in Germany according to the Federal Statistical Office. There are no details on how these are used exactly.

However, certain indications are provided in surveys by the Federal Office from 2014, when there were just under three million fewer apartments. At that time, about 42 percent of the apartments in residential buildings were occupied by the owners, 50 percent were rented, and the rest were uninhabited at the time of the survey.

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RENTING

How a German ‘Mieterverein’ can help you reduce your rent

If you're renting in Germany, you may have heard about a tenants' association - or Mieterverein. But you may not be aware that joining one could help save you money in the long run.

Published: 10 September 2024 11:17 CEST
Updated: 14 September 2024 08:15 CEST
How a German 'Mieterverein' can help you reduce your rent

There’s a truism that applies to many areas of life in Germany: there are plenty of rules and legal protections, but the vast majority of people don’t know them.

This feels particularly real when it comes to the world of renters’ rights. As a nation that generally prefers to rent than to buy, Germany has a huge range of in-built protections for tenants – but that doesn’t always stop landlords from bending the rules. 

The best way to make sure you’re getting a fair deal is to try and get familiar with your rights, or enlist the help of somebody who knows them inside-out.

That’s where the concept of the Mieterverein, or tenants’ association, comes in. These member-only organisations are there to advocate for the rights of tenants, keeping illegally high rents and other dodgy practices in check for renters in Germany. 

These types of associations can be a life-saver for foreigners who may struggle with the German language and German law, and could even help you save money in the long run. 

What is a Mieterverein?

A Mieterverein, or tenants’ association, is exactly what it sounds like: an organisation that stands up for the rights of tenants. It works by offering affordable memberships for renters – usually costing somewhere between €50 and €100 per year – which is then used to provide legal advice and representation, as well as advocacy and lobbying work. 

Ultimately, the idea is about strength in numbers. Instead of a single tenant taking on a big landlord like Vonovia or Deutsche Wohnen, a collective approach gives renters both more bargaining power and more resources.

Following this principle, many of the regional Mietervereine have clubbed together to create tenants’ associations in their state, which ultimately belong to the Germany-wide umbrella association, the Deutscher Mieterbund (DMB).

There are 320 associations currently active in the DMB, with the largest being the Berliner Mieterverein with more than 190,000 members. This is followed by Hamburg, with 78,000 members, and Munich, with 63,000. 

READ ALSO: How foreign residents in Germany are winning rent reductions

Members rely on tenants’ associations to assist with anything to do with Germany’s tenancy law. That means poring over rental contracts, ironing out difficulties with landlords, challenging rent increases or overly high rents, and fighting unfair or illegal evictions.

Of course, one of the most compelling reasons to join is to keep high rents in check – and find out if you could be eligible for a reduction. 

How can a Mieterverein help lower my rent?

Though it may not always feel like it, the vast majority of areas with a tight housing situation in Germany are subject to fairly stringent rental controls, known as the Mietpreisbremse.

These controls were mandated in a 2015 law that has recently been extended to 2029. Though there are some loopholes, the rules generally dictate that cold rents should be no more than 10 percent above the average rent for comparable properties in the same neighbourhood.

READ ALSO: German rent brake to be extended until 2029: What you need to know

The ways for calculating this are complicated but all you really need to know is that they are based on something called the Mietspiegel: a huge table charting the average rent prices based on factors like a property’s size, location, age and facilities. 

Berlin prenzlauer Berg

Flats in the Berlin district of Prenzlauer Berg. Photo: picture alliance/dpa | Monika Skolimowska

One service tenants’ associations can offer is to compare your rent against the Mietspiegel to see if you’re being charged too much. 

To do this, they’ll look at your contract and ask you a series of questions about your rental property. If it turns out the rent is illegally high, Mieterverein lawyers can help you draft a letter to officially challenge your rent and ask for it to be reduced.

Some tenants’ associations also offer legal protection insurance (Rechtsschutzversicherung) as part of their memberships, which can help you deal with any issues that may arise with the landlord later on. 

What about annual rent increases?

In most cases, these can be disputed as well. Under the Mietpreisbremse rules, rents can be raised by a maximum of 20 percent in the space of three years. This can be good grounds to challenge a big annual increase in rent – but it isn’t the only way. 

The legal representatives at your local Mieterverein will be able to help you dispute increases in rent, as long as you don’t agree to these increases straight away.

Once again, the increases may be based on a shaky foundation of illegally high rents to start with, so it’s always worth getting everything checked over in full by a qualified lawyer.

It’s also worth keeping an eye on any issues with your apartment, such as broken fixtures and fittings, because these can be grounds for a rent reduction until the problem is fixed.

READ ALSO: How to get a rent reduction for problems in your German flat

Advisors at the Mietervereine will not only be able to tell you what are grounds for a Mietminderung (temporary rent reduction), but also how much you could be entitled to. 

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