Real Estate

New contract rents stagnate – prices rise unchecked

There are signs of a slight improvement in the tense housing market. According to a current evaluation, the new contract rents have not increased any further. But prices are not falling everywhere.

According to a study at the end of 2019, new contract rents in Germany did not increase any further. In the fourth quarter, the average rents for newly concluded contracts stagnated compared to the previous quarter, announced the real estate specialist F + B (Research and Consulting for Housing, Real Estate and Environment GmbH).

Compared to the fourth quarter of 2018, the company, which advises cities and municipalities on the preparation of rent indexes, observed slight decreases (minus 0.3 percent). In some municipalities, especially in Bavaria and Baden-W├╝rttemberg, new contract rents have fallen. F + B managing director Bernd Leutner sees this as an increasing calming of the market.

Existing rents and property prices are rising

F + B had already calculated stagnating to slightly falling new lease rents in the course of the past year. However, the figures do not mean that tenants can now breathe a sigh of relief: The new leases indicate the direction on Real estate market, but only show a small part. According to F + B, rents in existing contracts continued to rise: Existing rents climbed 0.4 percent in the fourth quarter compared to the third quarter and 1.4 percent compared to the same period last year.

The Real estate prices in Germany meanwhile, rents rose much faster than they had for years. Condominiums rose in the fourth quarter by 5.4 percent within a year and single-family houses by 3.8 percent. However, F + B is observing a change among buyers: After observing large brokers, some major international investors are withdrawing from Germany.

One reason is the confusing and hardly calculable rent regulation, which also differs from state to state. Domestic purchases, for example from real estate groups, funds, wealthy private investors and owner-occupiers, are primarily responsible for the hefty surcharges.

Warning of “herd effect”

Leutner warned of a “herd effect”: German investors have often reacted with delay to international capital market trends and bought or sold real estate late. “The public sector is particularly pro-cyclical, selling its holdings at ridiculous prices from today’s point of view, only to buy some of them back at huge surcharges – sometimes at a price level at which private buyers have long since dropped out,” says Leutner.

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