The price-rent ratio is one of the most important measures for monitoring the housing market. This paper outlines and adopts a hedonic Spatio-temporal methodology for estimating quality-adjusted price-rent ratios for apartments in 21 major cities in Germany. With the user-cost equilibrium condition, it is subsequently possible to derive estimates of the cross-section of expected real capital gains. In addition, quality-adjusted property price and rental indices are computed at the city-level. Using this new hedonic method applied to prices and rents over the period 2014Q2 – 2018Q1, we find a large degree of heterogeneity across cities and time. These findings deliver deep insights into the dynamics of the German housing market and have important implications for housing investment and urban planning.