Rents in major German cities continued to soar with demand stoked by rising interest rates pushing consumers away from home purchases.
(Bloomberg) — Rents in major German cities continued to soar with demand stoked by rising interest rates pushing consumers away from home purchases.
In June, new tenants in existing buildings had to pay 16% more than a year ago in Munich and 14% more in Berlin, according to data from online real estate platform ImmoScout24. By contrast, buying an old apartment slipped 5.5% in Munich and 0.9% in Berlin.
“The sharp rise in rents is the consequence of a shift from the buy to rent market,” Immoscout said.
As the European Central Bank raises rates to rein in inflation, higher borrowing costs have made it more difficult on prospective buyers to afford homes. But supply is already tight, and efforts to close the gap by building new housing are falling short.
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From January to May, permits were granted to build 94,000 new homes, 31% less than the previous year, according to German construction association.
“A massive slump in private construction investment is foreseeable,” Felix Pakleppa, head of the association ZDB, said in a statement. “That makes severe market cuts increasingly likely.”
The homes that are being built tend to be at the higher end of the market and are making the situation for renters worse rather than better. In June, new apartment units were 40% more expensive in Berlin and 19% pricier in Munich.
“The development on the Berlin rental market is unprecedented in German history,” ImmoScout said.
The real estate platform uses a two-room apartment with 70 square meters as a reference object for rentals and a three-room apartment with 80 square meters for sales.
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