German city rental increases slow amid persistently tight market

Despite a sharp slowdown in rent growth, Germany’s urban housing market remains intensely constrained by tight supply and high demand.

Germany’s major cities are seeing a noticeable slowdown in the growth of listed apartment rents, even as the demand for housing remains intense and supply historically scarce. According to the latest quarterly update from the GREIX-Mietpreisindex, the nominal increase in offered rents for unfurnished apartments across 37 cities and regions stood at just 0.5 % for July–September 2025 compared with the previous quarter—with real (inflation-adjusted) rents effectively flat.

What the Numbers Reveal

From the IfW presentation: Compared with the same quarter a year ago, nominal rents rose 3.5 %, while inflation-adjusted increases were 1.2 %—the lowest annual growth since late 2021.

– The average asking rent across the 37 cities was about €14.16 per square metre in the third quarter.

– In Munich, the top-tier market, the average asking rent climbed to €22.96 per square metre, followed by Frankfurt at €17.55/m², Stuttgart at €16.11/m², Berlin at €15.82/m², Hamburg at €15.62/m², and Cologne at €15.21/m².

– Meanwhile, vacancy pressure remains extreme: the average online listing duration fell to just over 24 days in Q3—about four days less than the same quarter a year ago, and among the lowest recorded since data-tracking began (~10 years ago when listings averaged ~34 days).

Why the Growth Rate Is Slowing

Project lead Dr Jonas Zdrzalek of the IfW explains that after years of steep increases, the market appears to be reaching a constraint: “In many cities, households may no longer be willing or able to pay the level of rent increases we’ve seen in the past.”

At the same time, the data show that supply remains very tight: While the number of listings rose by 3.8 % compared with the previous quarter, the overall supply is still roughly 15 % lower than in 2015. In key cities such as Hamburg and Leipzig, availability has nearly halved since 2015.

In short: moderate rent growth does not mean relief for renters—the underlying market remains one of acute pressure.

Which Cities Stand Out?

The geographic variation is significant:

• Rising fastest: Leipzig (+1.1 %) and Düsseldorf (+0.7 %) saw the largest quarter-on-quarter gains among the largest cities.
• Stable or falling: Hamburg registered a slight drop (-0.2 %), and Berlin a modest fall (-0.3 %).
• Smaller cities moving toward big-city levels: Potsdam (+3.4 %) and Erfurt (+3.2 %) posted above-average gains; several smaller cities now record asking rents comparable with major metropolitan markets.

What It Means for Renters and Policymakers

For renters:

Even though headline increases are slowing, that does not equate to easier access. In major cities, housing remains highly contested and expensive. Listing durations are short, meaning many options disappear quickly. The wide range in asking rents—from under ~€10/m² in Leipzig to nearly €23/m² in Munich—reflects both regional disparities and the premium on location, quality and size.

For policymakers and the housing industry:

Analysts argue the structural problem is not just rent growth, but the limited pipeline of new supply. Without meaningful increases in housing construction and more effective utilisation of the existing housing stock, the market may remain tight regardless of slower price escalation. Internal IfW commentary warns:

“Even moderate rental growth cannot meaningfully alleviate conditions for housing-seekers—particularly in major cities—without a tangible increase in new builds.”

Does slower rent growth mean housing is becoming affordable?

Not necessarily. The pace of rent increase is moderating, but absolute rent levels remain high, supply shortages persist and competition remains fierce. Flat growth in nominal terms may reflect constraints facing renters rather than improved affordability.

Which cities are most affected?

Munich continues to lead with the highest asking rent. Eastern-region cities like Leipzig remain relatively more affordable—but are showing stronger growth, indicating upward pressure. Smaller cities near large urban centres are also rising.

Will the slowdown reduce pressure on the housing market?

Without a meaningful boost in new housing supply, experts caution that the market will remain “extremely tense” even with slower price rises. IfW emphasises that more units—not simply slower increases—are key to easing conditions.

Broader Implications

The current trend suggests a transition phase in Germany’s rental market: while runaway increases threaten social mobility and economic growth (e.g., reports from the Ifo Institute show that newly signed contracts can cost 45–70 % more than existing leases in cities like Munich and Berlin), the combination of high demand, low supply and modest growth means affordability remains under strain. High rent burdens compress household budgets and limit relocation mobility. As the housing question deepens, Germany’s broader economy—including labour mobility and city-region competitiveness—is affected.

Conclusion

Germany’s rental market is entering a new phase: steep rent increases have slowed considerably, but underlying tension remains. Walls of demand, scarce supply and metropolitan pressures continue to define the housing landscape, even as headline growth rates moderate. For renters and policymakers alike, the message is clear: slower growth is not the same as relief. Without structural solutions—especially increased supply—the market is full of complexity and risk, even in quieter quarters.

Sources: Kiel Institute DIE WELT stern.de