German Rent Rally Stalls in Biggest Cities After Years of Gains

Advertised rents in the German city of Hamburg fell for the first time in five years in July as lengthy rallies slowed or stopped in the country’s biggest urban areas, according to online broker Immobilien Scout GmbH.

Offered rents in the northern German city declined 0.7 percent in July from June, the first drop since June 2007, according to data compiled by the Berlin-based broker. Cologne in the west slid 0.2 percent in the first retreat since April 2012. Frankfurt and Munich declined 0.2 percent and 0.4 percent respectively, continuing a slowdown that began this year. Berlin was the only city among Germany’s five largest where rents rose.

“For the first time since we’ve been compiling the IMX Index we have identified tangible declines,” Michael Kiefer, Immobilien Scout’s head of valuations, said in a statement yesterday. The index was first compiled in March 2012. “This shows that very high rents can no longer be pushed through in large cities,” he said.

Offered rents in Berlin rose 0.4 percent in July from June, bucking the trend because rents in the German capital are still low compared with other cities, Kiefer said.

German housing costs in Germany’s largest cities have jumped in the past five years as young people move to areas where jobs are easier to find while construction fails to keep up with demand. Legislators are tightening rent regulation and politicians are promising to introduce new rules to keep rents and prices in check.

State governments in cities including Hamburg, Berlin and Munich plan to make it illegal to raise rents in certain neighborhoods by more than 15 percent over a three-year period, officials said in April. The initiative follows passage of a national law in December that makes it easier for cities that face a housing shortage to cap rents.

Offered rents in Germany’s five largest cities rose 4.4 percent in July from a year earlier, according to Immobilien Scout.

Before it's here, it's on the Bloomberg Terminal.