Sharp rise in housing shortage in German cities
PROGEDO already reported on the problems in the German rental market in spring 2020. You can read it again in the following articles:
Since then, the housing shortage has intensified. And it will become even worse in the future. In the following article, we will present you the reasons for this drastic development, what consequences it has for apartment-seekers, especially those coming from abroad, and how we think you can improve your chances of finding an (affordable) apartment.
Reasons for the housing shortage
Across Germany, apartments are in short supply. Sometimes hundreds of applicants compete for a single rental property. This problem is especially far-reaching in popular big cities like Berlin, Hamburg and Munich as the demand for affordable apartments is incredibly high. In response, the German government has set the goal of building 400,000 new homes a year – affordable and climate-neutral. However, this target was missed by far in 2021 with only 293,000 homes built. Improvement in 2022 and 2023 is very unlikely. But what causes these major issues in providing living space?
One of the main reasons for this problem is that building rental properties has become unprofitable in the past years due to a sharp increase in construction costs. Because of COVID-19, there have been many supply shortages in the last two years, which still affects the construction industry to this day. The Shortage of skilled workers, a high inflation rate and building regulations, which were enacted to protect the environment, also make construction more expensive.
Another factor that is currently contributing to the unprofitability of building apartments is the war in Ukraine as it has reinforced material shortages. All in all, construction costs have increased by 14.3% in the first quarter of 2022 compared to the same period in 2021. At the same time, construction interest rates have more than doubled from 1.06% to 2.64%. Both construction costs and construction interest rates are prognosed to increase further in 2022.
In addition to this, the Ukraine war is further exacerbating the housing shortage in Germany because of the high number of refugees searching for a home. Depending on the number of Ukrainian refugees, the Central Real Estate Committee forecasts 300,000 – 500,000 additional apartments needed. The resulting increase in demand will therefore reinforce the housing shortage in Germany even more in the future.
Consequences for apartment-seekers
The most logical consequence of the housing shortage is probably a long, nerve-racking apartment search due to the high competition. Unfortunately, everyone wants the best location with the best amenities at the best price. That’s why you have to be prepared for 10, 50 or 100 other competitors, depending on the attractiveness of the rental property. Private viewings are very rare.
Don´t listen to acquaintances or future work colleagues telling you they found a fairly inexpensive apartment in a good location a few years ago without any major problems. That is definitely over! In Berlin, for example, cold rents have almost doubled in the last ten years, while in other cities prices have risen between 20-60% in the same period, depending on the location. And this is only the beginning.
Consequently, you will probably not have any time to overthink an offer. Don´t show any doubts when viewing the apartment. You must signal that you absolutely want the property. If the landlord choses you, you should react immediately. Or else, another apartment-seeker will take your place.
Some of the other consequences of the housing shortage may be less predictable. For example, the consequences of the “Maklergesetz” (real estate agent act) of 2015. It was supposed to relieve the tenant by forcing the landlord to pay the real estate agent they have hired. But now more and more landlords rely on housing websites instead of real estate agents. Examples for these are Immobilienscout24.de and immonet.de. On these websites, landlords and interested parties communicate by e-mail, which is a clear disadvantage for those who do not speak German. As there are hundreds of applicants for one renting object, landlords can choose their tenants and unfortunately, they prefer going for Germans. This can be because of personal prejudices, but more likely practical reasons since many like to save themselves the more annoying communication in English or in broken German. Thus, as a foreigner, one is often immediately sorted out. The landlords prefer childless double earners, even in larger apartments. In order not to have to work again after 1-2 years or to pay a real estate agent, many properties are now only rented with a minimum rental period of 2-3 years. Pets, especially cats and dogs, are in most cases a knock-out criterion. So it is better not to mention them in the written application, but only in the personal interview, when you have been accepted into the inner circle of the potential new tenant.
Improve your own chances
Before you despair, we have put together a few tips that could make your apartment search easier.
- Try to stand out from other applicants, preferably with an application portfolio. Of course, all the documents that the landlord requests should be attached. Write something about yourself and why you would like to have the apartment. The tenant self-assessment form should be filled out completely. A nice picture of you or your family can make all the difference, especially if you are dealing with a private landlord. If you do not have pay stubs to show yet, ask your employer to draft you a letter confirming your employment and salary. This must then also serve as a substitute for the self-disclosure, which should prove your creditworthiness and freedom from debt, if you are entering directly from abroad. Especially in this case, a so-called “rent debt-free certificate” from your previous landlord can be very helpful. In this letter, your previous landlord should confirm that you have always paid your rent on time. If they then also mention how great you were as a tenant and that they regret that you are moving out – even better.
- Get a premium account at the real estate portals for the time of the apartment search. This increases their chances significantly. Many landlords also only accept applications from premium account members.
- Sometimes you can find ads announcing open apartment viewings. That is an apartment viewing where you do not have to apply beforehand. Visit those as often as possible. There will usually be 50-100 other people competing with you for these apartments, but it doesn’t matter for this tip. After all, the point here is not to actually get the apartment, but to observe the behaviour of other applicants. For example, the way they are dressed (not too casual, but not too formal either), how they present themselves and how they interact with the landlord.
- Don’t try to negotiate the rental price, or else you are guaranteed not to get the apartment! Rather, set a price limit beforehand and only apply for apartments that are within that range. But beware, energy costs have also exploded due to the Ukraine war. Many other incidental costs listed on rental listings will also rise sharply. Since these are always based on estimates based on past billing periods, you will be quite surprised with the first service charge statement, which is made once a year. Several hundreds or even thousands of euros could then be demanded by the landlord.
- Consider whether it makes sense to move into a furnished apartment first and then start looking for an apartment from there. For furnished apartments there are fewer competitors and you have much more time and greater chances of finding a suitable apartment. Many landlords want to meet the potential new tenant in person before offering them a lease. This can sometimes be done via video chat, but you have considerably greater chances if the conversation is face to face.
- If you as a company want to help your foreign employees in Germany to find an apartment, you can support them by helping them to create a search portal on apartment platforms and put an applicant portfolio together. Furthermore, you can prevent your employee from being sorted out by landlords by preparing a German sample text for him or her. Ideally, you also have German-speaking employees on site who can accompany the apartment seeker to viewings.