German rents rise 3.2% in second quarter as housing shortage bites

Rents in Germany are rising sharply amid a shortage of housing, with prices for new contracts in apartment buildings up 3.2% year on year in the second quarter, industry figures showed on Monday.

Trade group VDP, which represents around 50 real estate lenders such as Deutsche Bank and Commerzbank, said pressure has eased somewhat compared with recent quarters.

In Germany's seven major metropolitan areas, rents rose by a considerably weaker 1.5% compared with the national average. While Dusseldorf recorded the highest growth at 3.6%, rents in Berlin barely moved, rising just 0.6%.

Germany is estimated to be short of around 1 million homes. Construction often takes place in rural areas, while in urban centres demand far outstrips supply.

The VDP's figures are based on contracts concluded by more than 700 banks and are considered reliable.

Not only rents but also property prices rose in the second quarter, according to the VDP. Flats and houses became 1.9% more expensive year-on-year and 0.3% more expensive compared with the first quarter, the association said.

In the seven major metropolitan areas, property prices climbed 2.1% within a year, slightly more than the national figure. In the first quarter, flats and houses in the metropolitan areas had in some cases risen by more than 4%.

The housing shortage is driving rents and prices higher, the association said. Managing director Jens Tolckmitt praised the government's reforms, which aim to speed up approvals and cut construction costs with a fast-track building initiative. 

"The fact that planning procedures are to be drastically accelerated and that deviations from excessive technical requirements will be possible is exactly the right signal to all market participants," Tolckmitt said.