A study by the Institute of the German Economy (IW) has revealed that the number of advertised rental apartments has halved since 2022. This is not due to a decrease in rental units, but rather because fewer people are moving into homeownership. This trend is particularly evident in Leipzig.
In major cities, finding a rental apartment is becoming increasingly difficult. While the number of rental units has not decreased, there are significantly fewer listings nationwide. Despite this, demand remains high. Pekka Sagner from IW attributes this trend to a reduction in the number of people moving from rental apartments to homeownership.
“In normal times, before the sharp rise in mortgage rates, we had about 250,000 households moving from rental apartments to homeownership annually. This transaction volume has roughly halved,” says Sagner. This means that over 100,000 fewer households per year are vacating rental apartments.
Leipzig sees the sharpest decline in rental listings
Sagner conducted a study for IW on the development of housing offers from 2022 to the present. The study found that the number of advertised rental apartments in Leipzig has halved during this period, marking the steepest decline nationwide. “Leipzig remains a highly sought-after city. It has experienced incredible economic development and significant population growth.”
Leipzig has been the fastest-growing city among major cities in Germany during the 2010s and into the early 2020s, explains Sagner. “This demand has also been reflected in the development of rental prices.”
Supply of condominiums increased
While fewer rental properties are being offered, the number of condominiums for sale has increased by two-thirds since early 2022. Alexander Müller, director of the Association of Housing and Real Estate Industry Saxony, explains why this is happening. Renting out properties is becoming increasingly difficult. “The costs, the effort, the responsibility that comes with such a rental,” all of this is becoming more challenging, and “the ratio to the return is tipping,” explains Müller. For many owners, it may be cheaper or promise quicker money to sell a property.
However, demand for condominiums is currently very subdued. Müller speaks of an oversupply, which, in addition to costs, is also driven by a desire for more flexibility. “Young people do not want to commit yet. Who knows where I will work or be in five years, in ten years?” Renting is the better option for flexible life plans.
To ease the market situation, Müller calls for more investment in the construction of rental apartments. Study author Sagner also suggests improving government subsidies for purchasing condominiums.
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