Rent index, rent brake and comparative rent - three terms that shape the real estate market

These three technical terms from the world of real estate don’t all concern the same thing, but they are interdependent. It is equally important for tenants and property owners to understand their significance, as they directly influence the rent. We explain what they are all about from the perspective of a professional broker.

The rent index: Definition and purpose

The rent index or representative lists of rents records the comparative rents for a particular region. Interested parties can use it to find out the average local rent per square metre. This value is given for the rent per square metre of living space rent exclusive of heating and service charges. Because there are differences between different properties, the rent index also provides the range of rents charged. A property with high-quality furnishings could therefore be at the upper end of the rental range, while a house or apartment that is already a little outdated could be found at the lower end.

Of particular importance is the “qualified rent index”. This does not exist in all regions, but it is available for most large cities. The qualified rent index is calculated according to scientific statistical standards and is continuously updated. It can be requested from the city administration, but sometimes for a nominal fee.

Calculating the comparative rent

Papierhaus mit Taschenrechner

The information from the rent index is used to determine a comparative rent. As its name suggests, this is intended to determine a rent following a comparison with similar properties. The comparative rent is therefore set on a case-by-case basis, following a series of steps.

First of all, the basic price must be calculated, which results from factors such as the living space and the year the property was built. Then a location surcharge is added. Unsurprisingly, this is higher in very good locations, such as upscale neighbourhoods or central locations, than in less sought-after districts. The next step is to determine whether the condition of the property justifies a surcharge or a reduction. For example, flooring, bathroom fittings (sanitary facilities) and possible extras such as a ventilation system, air conditioning, underfloor heating or a fitted kitchen are included in the assessment (positive).

The information on the basic price and location surcharge is taken from the rent index.

Rent brake as a legally anchored cap

The findings from the comparative rent are, in turn, taken into account in the rent break. In many regions, the legislator allows a new tenancy only on condition that the rent is not set higher than 10% above the comparative rent. If, for example, the regional comparable rent is 10 Euros per square metre, the new rental may not exceed a maximum of 11 euros per square metre. The rent brake is obligatory and also important because the tenant is allowed to demand a reduction of the rent if it is not taken into account.

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