German student housing slows but affordability gap widens

Rent increases for German student housing have slowed sharply, rising 2.3% in 2025 compared to 5.1% the previous year, according to the latest MLP Student Housing Report. For investors, however, the slowdown is cosmetic: affordability has worsened and demand from international students continues to harden cash flows.

“We have a pause for breath, but not a trend reversal,” said Dr. Michael Voigtländer of the German Economic Institute (IW Köln). Berlin even recorded its first decline (-0.8%) after “previous extreme increases,” while small flats under 40 square metres still rose 4.3%—more than double the rate for shared rooms at 1.7%. Across 38 university cities, the Student Housing Price Index now stands at €541 per month, with Munich in a league of its own at €700–800 for a standard flat and Frankfurt second at €734. Leipzig, Freiburg and Konstanz posted annual gains above 6% over three years, well ahead of inflation. Rostock led 2025 with a 9.1% rise.

The affordability gap is stark: the BAföG housing allowance of €380 now covers rents in only four cities—Chemnitz (€296), Bochum (€368), Magdeburg (€374) and Greifswald (€402). In Munich, it barely pays for 15 square metres. This pressure is acute for international students, who now make up 25% of Germany’s student body. “Two-thirds of these students want to stay in Germany after completing their studies, and half can imagine starting a business,” said Uwe Schroeder-Wildberg, CEO of MLP. “In order to remain attractive as a location for these people, we need affordable housing.”

Operators are expanding regardless. Nido Living, with a €1.2 billion Iberian portfolio of 9,000 beds, is entering Germany under new head Daniel Havers. “German universities are rising in global rankings and demand from international students is growing, but supply is lagging behind,” said Nido CEO Carlo Matta. Home & Co, launched by Round Hill Capital and TPG Real Estate Partners, has just acquired a 164-unit residence in Frankfurt’s Bockenheim district from Industria’s Fokus Wohnen fund, valued at €20.5 million. The company plans modernisation and new communal facilities, with CIO David Pongratz stressing its expansion in “highly sought-after university cities” alongside portfolio ESG upgrades.

Medium-term pressures still point upward. Voigtländer notes that student numbers, though slightly down now, will climb again based on demographics, while new permits remain weak. The MLP report’s reliance on asking rents rather than contracts arguably reflects the real experience of international students, who lack the networks domestic students often use to find cheaper options.

Germany’s PBSA sector still accounts for just 1% of residential transactions, compared with 16% across Europe—underlining the room for growth. International platforms like Nido are betting on structural shortage rather than cyclical moderation, particularly in the international student segment where higher rents and longer stays support premium pricing. Domestic students, meanwhile, face an affordability squeeze that public subsidies have yet to bridge.

REFIRE: The pause in rent growth is real, but the structural shortage is stronger. Until BAföG rises meaningfully, Germany’s student housing story will remain an institutional investor play rather than a solution to student affordability.