The rents are falling again

Rents are falling for the first time since 2005 – this is the result of a new study. Even in many large cities, rents are falling, at least slightly. It remains unclear whether this is a trend reversal.

Will rents fall again soon?  The tenants in Berlin Lichtenberg would also be happy.

AThe housing market is surprisingly showing signs of easing: According to the research institute F + B, rents in new contracts fell by 0.3 percent in the first quarter of 2019 compared to the previous quarter. According to the institute, this was the first decline since 2005.

The rents fell not only in the German average, but also in some of the metropolises, which had recorded the highest rent increases in recent years. In Munich, for example, rents fell by 1.3 percent. Berlin, Düsseldorf, Frankfurt and Hamburg also recorded declines. Among the seven largest cities, rents only climbed further in Cologne and Stuttgart. F + B did not want to confirm whether the observed declines are a new trend, i.e. permanently falling rents. It is “probably one of the most exciting questions in housing policy of all” whether the trend will consolidate in the coming quarters. For now, one can only say that rental growth is currently taking a break. Compared to the first quarter of 2018, rents have increased by 2 percent.

Housing prices continue to rise

According to the data from the analysis company Empirica, the dynamics of the rent development has decreased. In the first quarter of 2019, rents for newly built apartments rose by 0.9 percent in the whole of Germany compared to the previous quarter and by only 0.3 percent in major cities. However, the fact that both institutes orientate themselves towards asking rents, which do not have to correspond to the actual contractual rents, contributes to the qualification of the information from Empirica and F + B.

In contrast to rents, apartment prices continue to rise: According to F + B, condominiums rose in price by 2.1 percent in the first quarter compared to the previous quarter and single and two-family houses by 0.8 percent.

Housing benefit increased

Independently of this, the federal cabinet decided on Wednesday its plans to increase the housing benefit, with which the welfare state subsidizes the housing costs of low-income employee households. The funding amounts of up to 870 euros per month for a four-person household are expected to increase by up to 30 percent on January 1, 2020, depending on the income and rent. In addition, the number of supported households is likely to increase from around half a million to 660,000 households.

Federal Interior and Construction Minister Horst Seehofer (CSU) expects housing benefit spending to rise by 20 percent to 1.2 billion euros in 2020 as a result of the planned changes. Seehofer described housing benefit as “one of the most important social benefits in housing policy”. The reform contributes to “that housing remains affordable even for low-income households”.

The draft law also provides for the housing benefit to be adjusted every two years in line with rent and income developments. Previously, subsidized households had often slipped into the Hartz IV system after a few years because its regularly rising requirement rates “overtook” the subsidy thresholds for housing benefit.