Germany's largest housing group announces significant rent increases

Millions of German tenants will have to brace themselves for sharper rises in housing costs: Germany's largest real estate company, the DAX-listed Vonovia Group, believes that more significant rent increases are inevitable in view of the high inflation rates. "If inflation remains at four percent on a sustained basis, rents will also have to rise accordingly each year in the future," Vonovia CEO Rolf Buch told the Handelsblatt newspaper. Otherwise, many landlords would get into serious trouble.

"We can't pretend that inflation will pass rents by. That won't work," Buch continued. The real estate giant owns about 565,000 apartments, most of them in Germany. The average rent charged by Vonovia rose to 7.40 euros per square meter in the first three months of this year - 3.1 percent more than a year earlier. This is still well below the current inflation rate of just under eight percent.

Vonovia is unlikely to be an exception. Experts at the online portal "Immoscout24" expect rent increases of six to seven percent over the next twelve months in view of the persistently high inflation. Expensive energy and food caused German consumer prices to rise more sharply in May than at any time since the oil crisis in the early 1970s. Goods and services cost an average of 7.9 percent more than a year earlier. In the European Monetary Union, inflation even climbed to a record 8.1 percent.

Representatives of the European Central Bank, including its President Christine Lagarde, have since announced their intention to raise interest rates and further reduce securities purchases in the summer. So far, the monetary guardians had kept key interest rates at record lows despite rising inflation rates, and they still even charge banks interest on their deposits in central bank accounts.

Image by Jens Neumann