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The big battle for small apartments

Small apartments with one room, centrally situated and, of course, affordable – that shouldn’t be too much to ask for, should it? Unfortunately, what have traditionally been marketed as student apartments are now in demand among other groups, such as single-person households and young professionals, which is pushing up both rents and prices.

  • Strong competition between students, commuters, young professionals and retirees
  • Student numbers up by 40 percent in ten years
  • Rental growth of up to 30 percent in 5 years for small apartments

Small apartments, big demand

It’s not all that often that students and pensioners have to compete directly with one another. These are two groups that live in two almost completely separate worlds. They shop at different stores, buy tickets to different concerts and live life to different rhythms. But now, at least as far as small apartments in the 30 to 35 square metre range, in central locations and not too expensive, are concerned, students and pensioners are in direct competition. And they are not alone: commuters and young professionals are also on the lookout for affordable apartments in Germany’s big cities – and those are often the smaller apartments. After all, the size of a home is one of the key factors (alongside its location, condition and features) in determining its cost.

40 percent more students

So it is not really surprising that rents for typical student apartments, i.e. one-room apartments close to universities (which generally equates to central), are rising faster than average apartment rents in almost all German cities. This has been shown by a recent IW study and is a direct result of the country’s growing student population. Over the last decade, the number of students registered at Germany’s universities has grown by 40 percent. At the same time, there has been extremely moderate growth in student accommodation, just five percent according to the German students‘ union, the Deutsche Studentenwerk. With not enough space in halls of residence, students have been forced to turn to the free market, markets that are already more than sufficiently over-heated in many regions and cities. The study reports: “Cities with expensive student residences tend to have a comparatively limited supply of state-subsidised affordable housing – and vice versa.”

Strongest rental price growth in Berlin

Of the eleven big cities and university towns included in the IW study, it is the rental prices in Berlin that have seen the most rapid growth: almost 30 percent since 2010. Students in Germany’s capital city now have to pay an average of €391 in rent for their small apartments each month, including warm water and heating. Although rents have increased significantly since 2010, Berlin’s figure is still much lower than Munich’s, where the same apartment now costs an average of €580. We are used to seeing Munich at the top of German real estate rankings, so it’s no real surprise that the city also heads the list of most expensive student apartments. The cities in second and third place, Frankfurt (€505) and Stuttgart (€474), are also fairly predictable. The cheapest city for students is Bochum, where a classic student apartment costs an average of €329 per month. Not only does the city have the lowest student rental prices, it has also recorded the slowest rate of rental price growth over the last five years, with prices up by a meagre seven percent.

Rents in shared apartments rising by 7 percent per year

Students hoping that a room in a shared apartment will allow them a much greater degree of financial freedom are in for something of a disappointment. Sharing a bathroom, kitchen and cleaning duties with fellow students might offer slightly better value than an individual apartment, but rental prices are not all that lower, and they have also been rising. An unfurnished room in a shared apartment in Munich now costs an average of €530 per month. In Frankfurt the same room will set a student back by €447 per month and in Stuttgart the figure is €430. The cheapest shared apartments are available in Chemnitz (€216 for a room) and Wilhelmshaven (€230). These figures are provided by Empirica’s analysts, who compiled data from more than 120 towns and cities with universities and colleges. Across all university towns and cities, rents at the beginning of the 2016 summer semester averaged €340, an increase of almost 20 percent since 2012.

Now its up to investors and developers

If anything, it is only going to become even more difficult for students to find attractively priced accommodation in heavily-populated urban areas. Both young professionals and retirees tend to have higher incomes and better credit histories – both of which are important to prospective landlords. As demand for smaller apartments continues to rise, there is only one realistic solution: Investors and developers will have to ensure that new housing construction delivers the necessary boost to the supply of smaller rental units.

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