Why German citizens have begun to rent housing more often than they buy 2021

Why German citizens have begun to rent housing more often than they buy

10.09.2021 15:30
Author: Damir Valiev

An interesting situation has developed in Germany: more than half of the citizens of this country have begun to live in rented housing. According to the predictions of the Trading Economics portal, this emerging trend will continue in the near future. Experts from the Tranio international property search service cite several factors explaining why Germans are more likely to rent apartments than to buy them.

Renting square meters is more profitable than buying them

In today’s Germany, the cost of rental housing is lower compared to the prices of sold properties. This is also confirmed by the price-to-rent index: it will take about 28-30 years in Berlin, 24-29 years in Hamburg, and 37-39 years in Munich to recoup a purchased apartment through rent. The payback period for housing increases mortgage interest rates.

Germany has frozen the cost of rent

According to Wohnungsboerse, the average price per sq. metes leased in Berlin in 2019 was 11.63-14.98%. According to Lukas Siebenkotten, head of the German tenants association, the established rates may rise in the near future. Therefore, the German authorities passed a law to freeze the prices of rental fees for a period of 5 years in 2020.

Real estate in Germany

The state protects tenants

With a long-term contract in hand, a tenant has no fewer rights to housing than its owner. Here are the key points to indicate this:

  1. If the landlord or landlady decides to terminate the lease, they cannot evict the tenant. They need to wait until the terms specified in the contract expire, or to prove in court that they need the apartment as their personal residence.
  2. The owner does not have the right to evict the tenant even when selling the property. For this reason, apartments in Germany are sold together with renters.
  3. Property owners do not have the right to raise the rent when and as much as they want: the frequency of these increases and the price limits are specified by law. The owner of an apartment can raise its rent to the average rates for the municipality, but only if it has not changed for the preceding 15 months.
  4. In areas where the real estate market is limited due to high demand, the owner has the right to increase the rent by only 15%. This rule applies to Berlin and Hamburg, as well as certain quarters of Bavaria, Lower Saxony and Brandenburg.
  5. The owner is allowed to inspect the property only in agreement with the tenant. If the owner opens the door to the apartment with a private key, they may face legal proceedings.

It is difficult to purchase an apartment in the center of a megalopolis

This favorable situation developed for tenants in Germany developed over the second half of the 20th century. The country’s authorities actively supported programs for the construction of new houses which were accessible to the population both in terms of equipment and rent. This made it possible to provide housing for the impoverished sectors of society.

The new housing policy led to an interesting trend: a large number of old houses have arisen in the centers of megacities. They are currently listed in the land register as one housing unit. Therefore, it is not allowed to purchase individual apartments in such buildings. It is only allowed to buy the whole property in its entirety or in part.

Germans who invest in real estate prefer to own the entire house. Therefore, they often buy up such old objects in the center. According to investors, it is much more profitable to buy a rental building consisting of 10 apartments than 10 separate apartments that are part of a building with other owners.

Germans like to move

Residents of Germany are very mobile: according to statistics, 9 million citizens of this country change their place of residence every year. Most Germans have no attachment to the city in which they have housing. If there is a chance to get an interesting job in another region, they willingly move to a new place. This led to the fact that many Germans have begun to rent out their real estate, and they themselves rent housing in other cities or regions.

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