Munich, January 15 – The housing market in Munich is facing challenging times, with the supply of rental apartments shrinking by a quarter since 2021. This alarming trend is compounded by rising construction costs and a significant decline in new building projects, according to the IVD market research institute.
Rental Market Dynamics: High Interest Rates Impact Buyers and Renters
Stephan Kippes, head of the IVD market research institute, noted that while the owner-occupied housing markets in Munich and Stuttgart saw little dynamic in 2025, the rental apartment markets were more affected by fluctuations. This is primarily due to increased interest rates for loans, which have deterred potential home buyers, leading them to remain renters. Consequently, the number of properties offered for sale has increased, while the supply of rental apartments has simultaneously decreased.
“While the dynamics in the owner-occupied housing markets in Munich and Stuttgart remained subdued in 2025, the rental apartment markets experienced stronger fluctuations,” Kippes stated. He added, “In the course of 2025, slightly more rental apartments became available again, but their number was a quarter higher in Munich before the interest rate turnaround.”
Massive Decline in New Construction Projects
A major contributing factor to the shrinking rental market is the substantial decline in new construction. The IVD institute predicts a decrease of up to 40 percent in building permits in Munich for 2025 compared to the previous year. Although exact figures for 2025 are not yet available for the Bavarian capital, 2024 already saw a shortfall in new housing units, with only 6,501 completed-a 19 percent reduction from 2023. This figure falls significantly short of the city council’s target of 8,500 new units.
Rising Construction Costs Add to the Challenge
Adding to the woes, the Institute of the German Economy (IW) forecasts that construction prices for real estate will climb by up to four percent. Furthermore, only a third of the 507 Bavarian, socially oriented housing companies plan to complete new construction projects in 2026. This indicates a broader issue within the construction sector that directly impacts the availability of affordable housing.
Impact on Munich’s Residents
The combination of dwindling rental options, rising costs, and a slowdown in new construction paints a bleak picture for those seeking housing in Munich. The city, already known for its competitive housing market, is likely to see further strain on its rental sector, making it even more challenging for residents to find suitable and affordable accommodation.
This ongoing trend highlights the urgent need for comprehensive strategies to address the housing crisis in Munich, including initiatives to boost new construction, stabilize building costs, and explore alternative housing solutions to meet the growing demand.
Source: https://www.merkur.de/lokales/muenchen/muenchen-angebot-an-miet-immobilien-schrumpft-deutlich-94121978.html
