They say there are three things we can be sure of in this life: death, taxes and rents constantly getting higher. While rising rents have long been a problem in big cities in Germany, the IVD housing price index has revealed that it is now increasingly becoming an issue in smaller cities and towns.

German towns and small cities are becoming more expensive

Germany’s real estate association, the Immobilienverband Deutschland (IVD) has released its residential price index, which covers 400 cities and municipalities in Germany. While rental prices in big German cities continued to rise in the second half of 2021, they did so less sharply than in the first half of the year. "The rental price dynamic is weakening for the third year in a row, especially in the big cities. Living is relaxing. Wherever there is construction, there is relief on the rental housing market," said IVD President Jürgen Schick.

Rents in German metropolises increased by just 2,1 percent this year, compared to 2,9 percent in 2020. On the other hand, rents increased significantly in medium-sized cities (those with up to 100.000 residents) from 3,4 percent in 2020 to 4,1 percent this year. Similarly, rents in small towns (those with up to 20.000 residents) rose by 5,1 percent this year, an increase of 2 percent from 2020.

More people moving to smaller cities

An explanation for the growing increase in rents in smaller cities and towns is an increase in population. Taking North Rhine-Westphalia as an example, coronavirus and years of rent increases have caused more people to leave big cities and instead head towards smaller settlements. For the first time in 10 years, more people left major cities in North Rhine-Westphalia in 2020 than migrated to them. In Cologne alone, almost 4.700 more people left compared to those that moved into the city. However, smaller towns in the state saw migration increase by 3,7 per 1.000 inhabitants.

There are a few reasons why more people have moved away from big cities over the past two years, and instead headed to smaller cities and towns. Coronavirus obviously played a big part, with travel restrictions limiting migration and people choosing to move to less crowded areas.

Another big reason is affordability; rents have been increasing in big cities for years and people move to smaller cities to find more affordable housing and lower their cost of living. This has become more of an option for people since working from home has become much more common (mainly due to coronavirus) and employees are more likely to have the option to work remotely, so people no longer need to live so near to the office. Unfortunately, as demand for housing in smaller cities and towns continues to grow, so do rents.