The prices of new rental contracts across Germany fell by 0.1 percent in the fourth quarter of 2020 compared to the previous quarter, recent data shows.
And rents on new leases have fallen in 27 of the 50 most expensive cities in Germany, according to the housing index by research company F+B, which measures developments on the German real estate market.
F+B compiles data from more than 30 million properties throughout Germany to make up the index.
According to experts, the reasons for the decline in prices include demographic developments, such as immigration to Germany going down.
Plus housing experts say there are more deaths than usual being reported in Germany - also affected by the coronavirus pandemic - which is a contributing factor.
The population is also stagnating in the two largest German cities, Hamburg and Berlin.
The largest drop in new contract rents was recorded in Kempten in the Allgäu region of Bavaria (a drop in 12.9 percent), followed by Wunstorf in Lower Saxony (minus 9.9 percent). But Freiburg in Baden-Württemberg also saw a drop of 5.6 percent.
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Among the largest cities, new contract rents fell most significantly in Frankfurt am Main, where the rent level declined by 2.1 percent compared to the previous quarter.
"We note that there was a significantly weakened rental dynamic in the top seven locations, especially in the fourth quarter of 2020, i.e. after the first lockdown," said F+B managing director Bernd Leutner.
The price of renting also eased further in Berlin. The average new contract rent was 6.4 percent lower than 12 months ago or 1.4 percent lower than in autumn 2020. The capital slipped to 126th place among the most expensive cities in the F+B index.
But there are also places where prices continued to rise strongly. In Garmisch-Partenkirchen in Bavaria for example, new contract rents rose by a whopping 10.6 percent in the fourth quarter compared to the third quarter. In RĂĽsselsheim in Hesse, F+B recorded an increase of 7.4 percent.
Munich house prices go down - but it's still pricey
In contrast to rents, the trend in property purchase prices continues to point upwards.
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Prices for single-family houses (up 0.7 percent) and apartments (up 0.6 percent) rose compared to the previous quarter.
"We believe that the ongoing pandemic with the second lockdown since December has generated a sustained surge in demand here," Leutner said.
In Munich, however, there's been a surprising decline.
Prices for apartments there fell by an average of two percent compared to the previous quarter.
Particularly in the prime locations, there was a slight downward trend: for the first time in two years, the city dipped from an upper price of €15,000 per square metre to €14,950 - but it still remains the most expensive city to purchase property in Germany.
On average, an apartment there costs around €7,000 per square metre.
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