Hacker News Reader

Comment by JanSt | Hacker News Reader

German rents go up in most places. There was an influx of 1-2 million migrants and refugees, all of which need living space. Additionaly, it's very expensive to build living space because of very high special requirements for insulation and energy efficiency. It's not worth it / possible for investors to build profitable cheap living spaces, so mostly luxury apartments are build. There are also high ancillary cost (10-15% of price) - i.e. taxes, notary etc.

View on HN

Much of the increase was driven by low interest rates. Mortgage rates more than halved, allowing people to borrow much more with the same income. Supply is coming (construction activity is at record highs) but will take some time to take pressure out of the market.

Germany has always had very low home ownership rates. The influx of migrants has put some pressure on rents (esp on the low end of the spectrum) but hasn't caused the surge in prices for houses or luxury flats. That was mostly driven by a booming job market, higher wages and low interest rates.

Berlin was always very cheap compared to other German cities. What we've seen now is more a normalisation than a bubble. But it certainly took some pressure of other markets that already were at very high prices.

Luckily, zoning laws in Germany allow new supply and there's a lot of that coming in soon. Some economists expect prices to fall by up to 20-30% in some areas over the next years as supply comes in and interest rates go up (likely starting 2019). That would probably be a healthy correction, easing the tensions that have developed.

We are talking about high rents, not high buying prices

They are highly correlated. Especially in a market where you can convert a flat to rent it out. If house prices are low but rents high, there's a lot of return in buying houses and renting them out. That market usually corrects faster than the general demand/supply imbalance.

An exception is high rents for flatshares. Not all flats are suitable for that so that an influx of young people (e.g. students) can increase prices for flatshares much more than that of other flats.

It may be the immigrants, alright. But the rich, white immigrants from Western Europe and North America, not the ones you probably have in mind. Also I wonder how many flats have been turned into illegal AirBnB hotel rooms, lots of new faces that are only around for a couple of days in the house I live since a few months ;)

As someone from Berlin, I can very much say this is the case.

1-2 million refugees are a tiny blip on German population and most of them came nowhere near Berlin. Poor people can't raise rents, the exploding tech sector and Berlin as a place for high-paid techies to move to has probably more to do with it.

Poor people can raise rents when they're getting government subsidies.

It's happening all over Germany. They are getting the apartments paid by the state, so high rents are being paid for them. 1-2 million is a huge number of people if you're lacking living space. Where to put them?

It's happening all over Europe. We have very low influx of refugees/poor immigrants in Portugal, but rents in Lisbon/Porto are skyrocketing.

ditto the UK. Took virtually no refugees but rents still increasing ... hmmm something wrong with this theory?

Seriously though in the UK we have had immigration over the last 20 years and that must have led to higher demand and prices. Best estimates are about 20% in 20 years in England.

https://fullfact.org/immigration/have-house-prices-risen-bec...

BUT

English house prices have risen by 320% on average over this period.

Other factors are - getting married later, more single people, more divorced couples, and financialisation of housing.

Probably a similar story in Berlin.

Munich is very simptomatic of this "singles" issues. More than half of the people there are singles, thus the housing need is quite high.

However, since the cheap money from the banks, more people are orienting to buy than rent, which is quite different from the past.

Talking strictly about Berlin, most of the EU migrants coming in here fall in two categories:

- highly skilled workers (IT, Finance, Sales, Marketing) that earn much more than average german folk, and compete for housing with upper class berliners

- unskilled workers (constructions) that live usually in temp housing and don't attempt to rent a flat for themselves.

As for the refugees, most of them still live in camps distributed across Germany and if they get a flat subsidised by the state it will be in some low demand neighbourhood.

Poor people can't raise rents

The poor people in many cases aren't paying the rents directly. The local governments are renting places at or above market rates to house poor people.

But on the whole the rising rents in Berlin is more due to the influx of European tech workers and the like, rather than refugees.

Another huge reason is that Germany has curbed its subsidized housing program since the early 90s. Every year, hundreds of thousands of apartments fall out of fixed price agreements, but only very few new subsidized housing is built.

(Subsidized housing as in: The government subsidizes your housing project if you agree to fixed rents for a certain period of time, afaik 20 years or so.)

It's not a blip, it's 2% of the entire population. No matter how poor they are, if they live in a house, they're pushing rents up by reducing available houses for everybody else. Some of those displaced people or the people they subsequently displace by moving will surely end up in Berlin because that'll be the next best option for them.

There's also a new system of rent control which probably makes it even more unattractive to invest.

But that's not the reason _at all_ that the rents are skyrocketing. Were it implemented properly the "rent-brake" would prohibit high rents.

that's now how an economy works

Well it limits supply, because it makes it less attractive to create more buildings, so the prices go up, if demand is increasing.

The "rent-brake" in Germany does not apply to newly built apartments.

Well, at least in Berlin you still have renter cooperatives, which also need to be cost efficient but not as profitable. I think even the city government jumps in to support new building efforts by the cooperatives.

> There was an influx of 1-2 million migrants and refugees, all of which need living space.

This seems to be a possible hypothesis. Could you validate it?

At least in Berlin, the influx of other european citizens did have a significant effect on the rents. I cba to find sources in English, but the city is trendy, and locals are annoyed by the masses of young hipsters who come live there, making rents rise, and don't even bother to learn german/integrate the slightest. There were for example articles about berliners who were flabberghasted that some bars and restaurants couldn't take orders in german.

OTOH, native German speakers easily get frustrated very easily and switch into English, if you're holding them up at a shop etc.

The bars that don't take orders in English don't actually refuse to do that out of some principle but just because there are just not enough German speaking baristas or bartenders or the market. For most business owners that is fine because this is a common scenario just in the trendy hoods where most of their customers are anyways English-only speakers.

It would follow mathematically from the pidgeonhole principle, right?

Reply on news.ycombinator.com