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Rents Slow Down Across Germany: Tenants Push Back as Increases Lose Momentum
At a glance
- •The Greix rent index from the Kiel Institute reports a 2.9% annual rise in German apartment rents the smallest since late 2021.
- •Engel & Völkers forecasts continued moderate rent growth of roughly 34% for the current year and into the next.
- •Different data sources (IfW vs. Federal Statistical Office) can show divergent growth rates; 2024 annual growth was reported at 5.9% by the Federal Statistical Office.
- •Drivers of the slowdown include increased supply in some areas, affordability constraints for tenants, shifts in demand and the lingering effects of higher mortgage rates.
- •The cooling trend reduces pressure for sharp yield increases in the property sector but leaves affordability challenges in high-price cities unresolved.
Market Analysis
Munich. After years of rapid growth, Germany's apartment rents have begun to lose steam. New data from the Kiel Institute for the World Economy (IfW) show that the nationwide increase in asking rents over the past year was only 2.9 percent a marked slowdown from the peaks seen in the years following 2021. According to the IfWs Greix rent index, this is the smallest annual rise since late 2021.
Industry observers say the trend will likely continue. Till-Fabian Zalewski, CEO for the German-speaking region at real estate broker Engel & Völkers, expects a further moderate rise of around three to four percent this year and anticipates a similar development into next year. His view echoes the markets shift from the double-digit or mid-single-digit jumps seen in some phases to a more restrained pace.
The Federal Statistical Office reported stronger increases in 2024 as high as 5.9 percent in its figures reflecting how different measures and datasets can show divergent snapshots. Still, the IfW index suggests a cooling momentum in recent months that could be driven by a mix of factors: rising supply in some locations, changes in migration patterns, affordability constraints, and the residual impact of higher mortgage rates on demand for rented housing.
For landlords and investors, the slowdown implies a more selective market. While rental growth is far from collapsing, the reduction in pace may alter expectations for yield expansion and influence decisions on new development or refurbishment projects. For tenants, the shift brings some relief after years of steep increases, though affordability challenges remain in Germanys most expensive cities.
Looking ahead, policymakers and market participants will watch incoming data closely. A sustained moderation would ease some social and political pressure around housing costs, but any reversal in economic conditions or renewed tightness in supply could quickly push rents back up. For now, the message is cautious: rents are still rising, but tenants are increasingly saying "no, thanks" to large hikes.