Sharply increased housing shortage in German cities
PROGEDO reported on the problems on the German rental market in spring 2020.
Since then, the housing shortage has worsened and will continue to worsen in the future. Read this article to find out why this is the case, what consequences it has for those seeking housing, especially those from abroad, and how, in our opinion, you can improve your chances of finding an (affordable) apartment.
Reasons for the housing shortage
Housing is in short supply nationwide. Especially in popular cities like Berlin, Hamburg, and Munich, hundreds of applicants sometimes compete for a rental property. But how does such a shortage of affordable housing arise while demand is simultaneously increasing?
The German government had set a goal of building 400,000 new affordable and climate-neutral homes annually. This target was already clearly missed in 2021, with approximately 293,000 new homes built, and there is unlikely to be any improvement in 2022 and 2023, despite a high number of approved housing projects.
One of the main causes of this problem is that building and renting has become unprofitable in recent years due to a sharp rise in construction costs. The coronavirus pandemic has caused numerous supply bottlenecks over the past two years, which also affected and continues to affect the construction industry. Skilled labor shortages, high inflation, and building regulations enacted to protect our climate are also making construction more expensive.
Due in part to the war in Ukraine, which exacerbated material shortages, construction costs rose by 14.3% in the first quarter of 2022 compared to the same period in 2021. Meanwhile, construction interest rates more than doubled from 1.06% to 2.64%. A further increase is forecast for both construction costs and interest rates in 2022.
Furthermore, the war in Ukraine is further exacerbating the housing shortage in Germany due to the large influx of refugees. Depending on the number of Ukrainian refugees, the Central Real Estate Committee predicts that 300,000 to 500,000 additional apartments will be needed. The resulting increased demand will therefore further exacerbate the housing shortage in Germany in the future.
Consequences for those seeking housing
The most logical consequence of the housing shortage is probably a long, nerve-wracking apartment search due to the intense competition. Unfortunately, everyone wants the best location with the best amenities at the best price. Therefore, when viewing an apartment, you have to be prepared for 10, 50, or 100 competitors, depending on the attractiveness of the rental property. Private viewings are unfortunately rare these days.
Forget the comments from friends or future colleagues about finding a reasonably priced apartment in a good location a few years ago without any major problems. That's definitely over! In Berlin, for example, rents excluding utilities have almost doubled in the last ten years; in other cities, prices have risen between 20 and 60 percent over the same period, depending on the location. The trend: sharply rising.
You usually have virtually no time to think things through. You have to clearly signal during the apartment viewing that you absolutely want the apartment, although this doesn't have any legal relevance. However, if the landlord offers you the apartment, you should act immediately. You usually don't get any time to think about it, as there are plenty of other interested parties who want the apartment.
Some other consequences that await you are perhaps less predictable. For example, due to the Real Estate Agent Act of 2015, which was intended to ease the burden on tenants by forcing the landlord, as the client, to pay the agent, more and more landlords are turning to brokerage portals such as Immobilienscout24.de and immonet.de and handling the rental themselves. The problem: communication here is usually exclusively via email, which is a clear disadvantage for those who don't speak German. In addition to personal prejudices, landlords are also put off by practical reasons. With the high demand, many prefer to avoid the more tedious communication in English or broken German. As a foreigner, you are often immediately weeded out. Landlords, who can more or less choose their tenants, prefer childless dual-income couples, even for larger apartments. To avoid having to go back to work after 1-2 years or pay an agent, many properties are now only rented with a minimum lease period of 2-3 years. Pets, especially cats and dogs, are in most cases a knockout criterion, so it is better not to mention them in the written application, but only in the personal interview once you have been included in 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, ideally with an application folder. Of course, you should include all the documents the landlord requests. Write a little about yourself and why you would like to have the apartment. The tenant's self-disclosure form should be filled out in full; a nice photo of you or your family can make all the difference, especially if you are dealing with a private landlord. If you cannot provide any pay stubs yet, ask your employer to write you a letter confirming your employment relationship and your gross salary. This must then also serve as a replacement for the self-disclosure, which is intended to prove your creditworthiness and freedom from debt, if you are arriving directly from abroad. A so-called "rent debt freedom certificate" from your previous landlord can be very helpful, especially in this case. In this letter, your previous landlord should confirm that you always paid your rent on time. If they also mention what a great tenant you were and that they regret that you are moving out – all the better.
- Get a premium account on the real estate portals for the time you are looking for an apartment. This will increase your chances considerably; many landlords only accept applications from premium account members.
- Sometimes you'll find ads announcing open apartment viewings. These are apartment viewings where you don't have to apply in advance. Go as often as possible. While there will usually be 50-100 other prospective tenants competing with you for these apartments, that's irrelevant for this tip. The point here isn't actually getting the apartment, but rather observing the behavior of other prospective tenants. For example, the way they dress (not too casual, but not too formal either), their demeanor, and how they interact with the landlord.
- Don't try to negotiate the rent; you're guaranteed not to get the apartment! Instead, set a price limit beforehand and only apply for apartments within that range. But be careful! Energy costs have also skyrocketed due to the war in Ukraine. Many other additional costs listed in rental offers will also rise sharply. Since these are always based on estimates from previous billing periods, the rude awakening will come at the latest with the first annual utility bill. The landlord could then demand several hundred or even thousands of euros in additional costs.
- Consider whether it might make sense to move into a furnished apartment first and then start your apartment search from there. Furnished apartments have fewer applicants, giving you significantly more time and a better chance of finding a suitable apartment. Many landlords want to meet potential tenants in person before offering them a lease. While this can sometimes be done via video chat, you have a much better chance of success if the conversation takes place face-to-face.
- If you, as a company, want to help your foreign employees in Germany find accommodation, you can support them by setting up a search portal on housing platforms and compiling an application portfolio. Furthermore, you can prevent your employees from being rejected by landlords by providing them with a German sample text. Ideally, you also have German-speaking employees on-site who can accompany apartment seekers to viewings.
- Hire a relocation agency, preferably PROGEDO. This is especially true if you're still living abroad and can't come to Germany to look for an apartment, or can only come for a few days. Your future employer is often willing to cover these costs or contribute to them. If you ask about it during the interview, you'll have an even better chance. Simply name us as your preferred partner, and we'll take care of everything. Our experts will take care of everything needed to find an attractive apartment for you or your employee: Expectation management, which will realistically prepare you for the German housing market in general and the one in your desired location in particular. This includes the apartment search, i.e., research, contacting the landlord by email or phone, scheduling appointments, and all other dealings with real estate agents and landlords. Of course, if you wish, we can also compile your application documents, accompany you or your employee to apartment viewings, and explain the key components of the rental agreement. With a success rate of almost 100% and over 27 years of experience in the German housing market, our experts are at your side as your first friend in a foreign country!