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How real estate in Germany has rocketed in the pandemic

Many industries have suffered in the pandemic, but Germany's real estate market is thriving, a new report shows.

Apartments in Hamburg's Eimsbüttel area.
Apartments in Hamburg's Eimsbüttel area. Photo: picture alliance/dpa | Marcus Brandt

While restaurant owners, retailers and cultural organisers have been feeling the burden of the pandemic in Germany, at least one sector of the economy has come through relatively unscathed: residential real estate.

The price dampener feared at the beginning of the pandemic did not materialise last year, in fact, quite the opposite happened: purchase prices increased at an above-average rate.

Since a low point in 2009, homes have more than doubled in cost. A report by the Council of Real Estate Experts (Immobilienweisen) presented earlier this week puts the price increase since then at 146 percent, reported German newspaper FAZ on Tuesday.

READ ALSO: The German cities where property prices are soaring

What did the report find?

In 2021, condominiums rose in price by an average of 14.3 percent nationwide, to €3,140 per square metre, according to the report. Compared to the previous year, the price increase has intensified: from 2020 to 2021, the increase was 11.2 percent.

Prices for homes in eastern Germany have recently risen more strongly than in the west. Large cities in the east – excluding Berlin – recorded an increase of 19.6 percent last year to a price per square metre of €2,621. In western cities prices rose by only 12.5 percent, although the level is also significantly higher at €4,096.

READ ALSO: Why Frankfurt could have the biggest housing bubble in the world

What about rents?

Rents also rose, but not at the same rate as real estate. According to the real estate experts group, they went up by 3.7 percent to an average of €8.46 per square metre. The authors of the survey observed the strongest increase (4.1 per cent) in asking rents in western German districts to €8.27.

In the so-called ‘A-cities’ – Berlin, Düsseldorf, Frankfurt, Cologne, Hamburg, Munich and Stuttgart – new leases rose by 2.7 per cent to an average of €12.27 per square metre.

Berlin continues to be an outlier, with asking rents rising by 4.7 per cent to €9.70 on average. The absolute front-runner is still Munich, with rents averaging a shocking €16.99 (plus 2.6 percent).

READ ALSO: Why rent prices in major German cities are starting to fall

The number of new-build flats in Germany is rising, but it’s not near the current targets.

Flats in Cologne.

Flats in Cologne. Photo: picture alliance/dpa | Federico Gambarini

After around 306,000 flats completed in 2020, the real estate report estimates the number of new-builds for 2021 to be 315,000.

Germany’s government has pledged to increase the annual number of new builds to 400,000 per year, but experts say that will be difficult to reach.

Housing is a major social problem in Germany, especially in cities. 

According to a study from last year, around 4.1 million households in Germany’s big cities have to fork out more than 30 percent of their net income on rent, including utilities and heating.

Among social scientists and real estate experts, a rent burden ratio above 30 percent of household income is considered problematic, especially for households with lower incomes.

Many landlords don’t allow people to rent a flat if they reach this threshold because they doubt that tenants can afford their flats long-term under these circumstances.

The study released in 2021 and funded by the Hans Böckler Foundation, also found that around 2.2 million households in the 77 major German cities have to spend at least 40 percent of their income on rent, and for just under 12 per cent – or almost one million households – more than half of their take-home pay goes on rental costs. 

On average, tenant households in large cities pay 29.8 percent of their income for gross ‘warm’ rent (rent including associated costs like electricity and gas).

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REVEALED: How much it costs to rent a room in a German university town

The cost of renting a room in a shared flat in one of Germany's 97 university towns is higher than ever before - though there are major regional differences, a new study suggests.

REVEALED: How much it costs to rent a room in a German university town

According to the study ‘University Town Scoring 2021’, people renting a room in a student hotspot currently have to shell out an average of €414 in ‘warm’ rent, meaning rent plus service charges and energy bills.

The Moses Mendelssohn Institute – who conducted the study – looked at around 25,000 advertisements for rooms in shared flats in 97 university towns across Germany between December and February.

They found that rents for students and other young people in these areas were higher than ever before.

Two years ago, the average warm rent for a room in a university town was €389 per month.

There are enormous differences in rents across different regions though – particularly across eastern and western university towns and in the major cities.

Unsurprisingly, Munich, which is home to the prestigious Ludwig Maximilian University, topped the scoreboard as the city with the highest rents for rooms in shared flats. 

In the Bavarian capital, students and other young people renting a room are currently expected to shell out a whopping €680 per month for their warm rent – far higher than any other university town in Germany.

The second most expensive city for room rentals was Frankfurt am Main, with average warm rents of €550 for a single room. In joint third place were Hamburg and Berlin, where single rooms cost €500 per month on average.

Outside of the capital, where rents have been soaring in recent years, flat-share tenants in other parts of eastern Germany can expect to pay around half of the average rents in the major cities. 

In the university towns of Freiberg, Mittweida und Chemnitz in Saxony, for instance, an average room in a shared flat will set you back €256 per month, including bills.

The cheapest city in the rankings, however, was Brandenburg’s Cottbus, where warm rents for a single room are just €230 a month.

The pandemic effect

Though average rents have gone up in recent years, experts say the price hikes have been dampened slightly by the pandemic, which has provided some relief on the housing market in some areas.

With online teaching becoming the norm in most universities at the height of Covid-19, many students were discouraged from looking for rooms in their university town and instead opted to save money by staying at home with their families.

High-rise flats in Chemnitz

The Karl Marx Monument and high-rise flats in Chemnitz, Saxony. Chemnitz is one of the cheapest places in Germany to be a student. Photo: picture alliance/dpa/dpa-Zentralbild | Hendrik Schmidt

READ ALSO: What it’s like to study abroad in Germany during a pandemic

This initially dampened rising rents and even led to prices going down in some of the university towns that were studied.