In 2025, tenants and property purchasers are predicted to encounter hardships once more.
Skyrocketing rents have become the norm, with experts predicting a continuation throughout the upcoming year. Purchase prices, on the other hand, show some promise but remain out of reach for many. The forecast for new housing construction is downright grim.
Real estate gurus anticipate another surge in city rents next year. This is due to persistent housing demand that outpaces new apartment construction. Experts predict a modest increase in purchase prices after the recent market correction.
Sören Griebel, Director of Residential Real Estate Research at Jones Lang LaSalle (JLL), believes new construction will not see a significant upsurge by 2025. "Homebuilding enthusiasm is rife among households, but craftsman and material costs remain high, and the recent interest rate dip isn't enough to counterbalance the sky-high construction and land expenses." As a result, housing scarcity and competition will persist, especially in urban areas, with implications for rents.
Michael Schlatterer, Managing Director at real estate services provider CBRE, shares the same outlook. He attributes Germany's housing scarcity to construction industry insolvencies and immigration.
Q3 saw significant rent increases
JLL data shows robust rent hikes even in rural areas during the third quarter. Major urban centers and other large cities witnessed increases of around 8% compared to the same period last year. This was followed by cities functioning as regional hubs (up approximately 4.5%). Rents in other urban areas and rural areas increased by roughly 4%. "Rents have soared more recently than during the previous real estate boom until 2022," says Griebel.
However, the market for purchase prices is more stable. JLL notes minimal increases in most regions during the third quarter, akin to the Federal Statistical Office's data. "The real estate market is starting to pick up, but buying or building still remains too pricey for many," says Griebel.
Although lower construction interest rates make real estate loans cheaper, their impact on real estate prices should not be overestimated, says Peter Richter, analyst at Landesbank Helaba. Meanwhile, Ulrich Kater, Dekabank's chief economist, hints at limited downside potential for construction interest rates.
New construction decline anticipated
Industry reports suggest a possible decline in the residential construction industry. "The residential construction sector is on the brink of disaster next year, with hardly any new building permits issued for the past two years," said Tim-Oliver Müller, head of the HDB industry association, to Bild. "We're ecstatic if 200,000 apartments are completed. There are even whispers about only 150,000," Müller emphasized.
The association's CEO called for a "true policy overhaul" in housing and "a clear commitment to building in Germany" from the next federal government. In this context, Müller also suggested merging the federal ministries of construction and climate protection: "Only if both are merged and viewed as a single unit, worthwhile and especially affordable solutions will emerge."
The cost of renting in rural areas also saw a notable increase during the third quarter, with rents rising by approximately 4%. Despite the modest increase in purchase prices after the recent market correction, they still remain out of reach for many.
