At long last, the end of high rental prices in Germany could be in sight! According to a new study, there are increasing signs that rents should soon stop rising. In some German cities, they might even fall.

Spiralling rents across Germany

The prices paid for rentals in Germany have been a hot news topic for some time now. Only a few weeks ago, a landlord in Munich made headlines advertising a parking space for 500 euros per month. Rental prices have reached a record high in the Bavarian capital, where tenants pay an average of 11,69 euros per square meter (up from 9,79 euros in 2011).

The price explosion isn’t just confined to Bavaria, however - rents are also sharply on the rise for all housing types in Germany’s major metropolises and their surrounding areas - the so-called “bacon belt” (Speckgürtel). In Munich and Stuttgart, rents in these outlying areas are now just as high as in the cities themselves - and higher than for central properties in cities like Hamburg, Cologne or Frankfurt.  

Sharp fall in demand for housing

In a new study, however, research institute Empirica have detected the first signs that this rent madness may be coming to an end. According to the report’s author, Reiner Braun, “There is a light at the end of the tunnel”. The reason for his hopeful prediction is simple: finally, it seems as if enough properties are being built to keep up with the number of people searching for housing in Germany.

Braun’s study found that over the last decade the rate of house building has almost doubled, from 159.000 per year in 2009 to 300.000 in 2018. Moreover, this building activity has been concentrated in areas where demand is highest. Thus, the yearly housing shortage in the cities worst affected by rapidly rising rents - such as Berlin, Düsseldorf, Frankfurt, Hamburg and Cologne) shrank by 80 percent from 125.000 to 25.000 units.

Rents might fall in Germany

As soon as the gap between demand and supply is fully closed, the rent increases will come to a stop, Braun predicts. At some point in the not-too-distant-future, they may also begin to fall. This would certainly happen if the increased rate of building overtook demand, resulting in an oversupply of new homes.

Multiplying signs of a slowdown in the global economy could also spell a cool-off for the German housing market. “If people’s salaries are lower,” Braun explains, “They spend less on their rent.” Looking forward, he expects that rents will stagnate at a high level over the next four years; from 2023, they could start to fall.