BNP Paribas Real Estate publishes figures on the housing market in over 100 cities

On average in the seven largest German cities, the median asking rent for new-build apartments is currently €21.35/m², 2% above the level at the beginning of the year. Munich remains the most expensive new-build location with a median new-build rent of €25.90/m². Hamburg continues to rank second at €23.00/m². Stuttgart moves up to third place with €20.80/m², overtaking Berlin, Frankfurt and Düsseldorf in the ranking of the most expensive new-build markets. Outside the top locations, Freiburg im Breisgau (€20.00/m²), Heidelberg (€19.90/m²) and Potsdam (€19.35/m²) are among the most expensive new-build rental housing markets in Germany.

The interest rate turnaround has permanently changed the German residential investment market. However, the current analysis shows that the market adjustment since the peak in 2021 has varied depending on the city category. While the purchase price factors in A and B cities developed comparatively similarly, the correction in the C cities was much stronger. At the same time, the fundamentals of many housing markets have further strengthened due to rising rents, falling vacancies and a persistent excess demand. The results indicate that the market adjustment of recent years was primarily driven by the capital market and is less due to a deterioration in housing fundamentals.

"It is particularly interesting for investors that the market adjustment since 2021 has been much more differentiated than many expected. While C cities are now valued at higher risk and liquidity premiums, many B cities continue to be remarkably close to A locations. The interest rate turnaround has thus made the differences between the market segments more visible again and noticeably increased the importance of market quality, liquidity and fungibility," says Christoph Meszelinsky.

The structural shortage of supply on the German rental housing markets is likely to persist in the coming years. Although there are increasing signs of a stabilisation in new construction activity, a noticeable increase in the supply of housing is not expected in the short term due to the long development and construction periods. At the same time, demand for housing remains high. Class A cities in particular continue to benefit from population growth and ongoing urbanisation trends. At the same time, however, numerous university, large and medium-sized cities are also showing continued high demand dynamics, so that the excess demand is increasingly affecting a large number of German housing markets. The existing gap in new construction is likely to close only slowly for the time being, so that the excess demand will continue, especially in the tight housing markets. Against this backdrop, rents are expected to continue to rise, with the new construction segment likely to show the strongest momentum due to limited supply and high development costs.

The general conditions also suggest that the German rental housing market will remain highly attractive in the medium to long term. Stable demographic trends, the trend towards smaller households and the often significant price advantages of existing leases compared to new lettings limit fluctuation and maintain excess demand. Fundamental changes in these market mechanisms are not foreseeable at present. At the same time, residential real estate offers a high degree of stability and predictability in view of the continuing increase in geo- and macroeconomic uncertainties. Particularly against the backdrop of significantly higher rent levels in recent years and persistently low vacancy rates, many residential markets now have a robust earnings basis. Thanks to the combination of resilient demand, limited supply and comparatively reliable cash flows, the German rental housing market is therefore likely to continue to be regarded as an attractive asset class in the future.

All detailed information and graphics on the housing market can be found here.

In the district dashboards of BNP Paribas Real Estate you can find out more about the current (rent) price level and the development at district level. Detailed rental and price time series can be found here.