Rents on new leases have fallen in 27 of the 50 most expensive cities in Germany, according to a housing index by real estate research company F+B. Check out where the price of housing is falling in the federal republic.

New contract rents fall across Germany

The cost of new rental contracts in Germany fell in the fourth quarter of 2020 by an average of 0,1 percent compared to the previous quarter, according to F+B’s housing index, which takes data from 30 million houses and apartments across the country.

According to experts, rents are falling due to demographic changes such as a decrease in immigration and an increase in deaths - both effects of the coronavirus pandemic. This led the populations of Germany’s two largest cities, Hamburg and Berlin, to stagnate.

Rents are cheaper in Frankfurt and Berlin

Out of Germany’s 50 largest cities, new contract rents decreased most significantly in Frankfurt, where, in the fourth quarter of 2020, rent levels dropped by 2,1 percent compared to the previous quarter. "We note that there was a significantly weakened rental dynamic in the top seven locations, especially in the fourth quarter of 2020, i.e., after the first lockdown," said F+B managing director Bernd Leutner.

New contract rents also dropped in Berlin, which dropped down to 126th place in the ranking of Germany’s most expensive cities. New contract rents in the capital fell by 6,4 percent over the last 12 months.

The largest decrease in new contract rents was recorded in Kempten in Bavaria, where rents dropped by 12,9 percent in the fourth quarter of 2020 compared to the previous quarter. Kempten is followed by Wunstorf in Lower Saxony, which experienced a 9,9 percent drop. New contract rents also dropped by around 5,6 percent in Freiburg in Baden-Württemberg.

Despite new contract rents falling across the country, there were places where they increased. For example, in Garmisch-Partenkirchen in Bavaria, new contract rents rose by 10,6 percent in the fourth quarter. Similarly, there was an increase of 7,4 percent in Rüsselsheim in Hesse.

House prices continue to rise

Property prices, on the other hand, have continued to rise in the final quarter of 2020. Prices for single-family houses rose by 0,7 percent and apartments rose by 0,6 percent compared to the previous quarter. "We believe that the ongoing pandemic with the second lockdown since December has generated a sustained surge in demand here," Leutner said.

In Munich, house prices have unexpectedly fallen by about 2 percent in the fourth quarter of 2020. However, the city still remains the most expensive for buying a property in Germany, at an average of around 7.000 euros per square metre.