German rents up 4%, report says

German housing rents rose 4% year-on-year in the second quarter, the German Economic Institute (IW) reported on Monday.

The steepest increases were recorded in large cities outside Germany's biggest metropolitan areas, where rents rose by 4.9%. There were considerable differences between major cities, the IW found.

In Cologne, rents rose 7.9%, while Hamburg saw an increase of 5.5%. The rises were much more modest in Stuttgart (0.9%) and Berlin (1%).

The IW said that supply had dried up in many areas, with listings almost 12% below the level seen at the beginning of 2022. The shortage is particularly pronounced in many large cities. In Hamburg, the number of rental listings more than halved, while Frankfurt had 43% fewer listings.

IW real estate economist Pekka Sagner attributes this primarily to one key factor: many people are staying in homes that no longer suit their needs, because they do not want to give up their low rents.

In the purchase market, prices increased only moderately, with apartments, freestanding homes and semi-detached houses each rising by 0.8% compared with the same quarter last year, again with strong regional differences.

In Dortmund, home prices rose by 5%, while in Munich they fell by 1.9%. 

The supply of homes for sale has increased substantially since interest rates began to rise. According to the IW, there are now nearly twice as many apartments and around 140% more freestanding and semi-detached houses listed for sale nationwide than in the first quarter of 2022. 

"The increase in listings primarily reflects weaker demand and longer selling times, rather than a corresponding increase in the housing stock," Sagner said.