Tenants Struggle with Skyrocketing Utility Costs Post-Ukraine War
After the Ukraine war, consumers are grappling with a 43% increase in warm utility costs compared to pre-conflict levels. According to a study by the German Economic Institute (IW), there's been minimal relief for renters in terms of ancillary expenses.
The study examined rental contract advertisements, showing a nearly 50% reduction in discounts for warm utility costs compared to before the war. In September 2023, tenants paid around EUR 1.67 per square meter for warm utilities, with a minor decrease from the previous year (EUR 1.74). Cold ancillary costs, including waste disposal and cleaning, added EUR 1.78 per square meter, a slight increase from the 2022 figure (EUR 1.72). Ultimately, total ancillary costs fell marginally to EUR 3.45 per square meter.
The energy price caps expiring by 2024 could cause another hike in energy bills, posing a significant threat to many households. Michael Voigtländer, an IW real estate specialist, explained that while energy prices have dropped on the market, tenants haven't experienced the same reduction in utility costs.
Ancillary housing costs consistently contribute to a substantial part of the total rent, with the national average rising to a record 27% in 2022. Although rents increased by 5% in 2023, they were still 25% at year-end.
The IW analyzed warm and cold ancillary costs for rental apartments in 400 German cities and districts for the fourth time, examining almost 1.93 million advertisements between 2018 and 2023 on behalf of Deutsche Invest Immobilien AG.
Amidst Rising Energy Prices, Consumers Adapt
The energy crisis, triggered by the Ukraine war, has led to a significant increase in energy prices in Germany. Despite the uncertainty, rental prices in Cologne have remained relatively stable. However, tenants are confronted with higher incidental costs due to the rise in energy prices.
The Institute of the German Economy (IW) reports that ancillary housing costs continue to account for a significant portion of the total rent in Germany. In response to the energy price hike, many households have switched to alternative energy sources, such as solar panels, to lower their reliance on gas and reduce energy costs.
Impact of Energy Price Brakes Expiration
As the energy price brakes approach their expiration, many consumers in Germany are bracing for an increase in energy bills, particularly for warm utility costs. Despite a slight decrease in gas and heating oil prices, they still remain considerably higher than before the crisis, with gas now costing around 11 cents per kWh compared to 6 cents pre-conflict.
The German government is considering a €700 yearly subsidy for heating expenses to help low- and middle-income households with the soaring heating and hot water costs.
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- Enrichment Data Insights:
- German consumers are primarily focused on reducing energy consumption due to the ongoing energy crisis.
- 60% of Germans have maintained their cost-saving efforts, with 75% of over-65 individuals becoming more mindful of their energy consumption habits.
- Households and small shops in Germany have managed to maintain low gas consumption levels.
- Despite a moderate decrease in oil and gas prices, heating costs remain high, and gas prices have dropped by 12% and heating oil by 8% in 2024.
- The German government proposes a €700 yearly subsidy for heating expenses to support low- and middle-income households.
- Nearly 300,000 people in Berlin could not afford proper heating in 2023, and the situation remains challenging, with 6.2% of the German population unable to afford heating in 2024.
- All major political parties have included affordable energy policies in their programs leading up to the national election.
