BERLIN / LONDON (IT BOLTWISE) – The German real estate market continues to show clear dynamism. While residential property prices rose slightly in the third quarter, rents in major cities rose significantly. Single- and two-family homes rose in price by 0.9 percent compared to the previous quarter, while rents rose particularly sharply in cities such as Düsseldorf and Cologne.
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The German real estate market is in a phase of adjustment in which both residential property prices and rents in major cities are rising. A current study by the Cologne Institute for the German Economy (IW) shows that prices for single- and two-family homes rose by 0.9 percent in the third quarter compared to the previous quarter. Compared to the previous year, prices have actually risen by 3.5 percent, indicating continued demand for home ownership.
The increase in rents in large cities is particularly noticeable. In Düsseldorf and Cologne, new contract rents rose by 5.6 percent and 5.1 percent, respectively, while Hamburg recorded an increase of 4.4 percent. Berlin is an exception, as rents here fell slightly by 0.2 percent. This development could be due to a short-term compensation movement following the failure of the rent cap.
A possible reason for the rising prices and rents could be the stable development of building interest rates, which is encouraging more households to invest in home ownership. In addition, rising wages have improved affordability, further fueling demand. Despite these developments, pressure on the market remains high as new building completions fall short of expectations.
The IW predicts that the prices for residential property and new contract rents will develop in parallel in the coming quarters. The market appears to have settled into a new normal where supply remains tight due to insufficient completions. Experts stress that 372,000 homes would need to be built annually to meet demand, but only 235,000 completions are expected this year.
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