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Local Germany
02-07-2025
- Business
- Local Germany
Why house prices in Germany are rising
Residential property prices in Germany rose by 3.8 percent in the first quarter of 2025, compared with the same period in 2024. The National Association of German Cooperative Banks (BVR) is predicting that prices will rise by 3.2 percent this year and by 3.1 percent in 2026. Experts agree that the second consecutive quarterly increase in property prices signals an end to the downturn that began in late 2022. Persistent housing shortages, robust demand – especially in major cities – and the stabilization of mortgage rates are driving the latest surge, with forecasts pointing to further increases in the coming years. Where are prices rising fastest? In Germany's seven largest cities – Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart, and Düsseldorf – the average price of an apartment has climbed by 3.8 percent year-on-year and 2.4 percent compared to the previous quarter. Large independent cities outside these metropolitan hubs saw even stronger growth, with apartment prices up 6.1 percent year-on-year. Densely populated rural districts also experienced increases, while sparsely populated rural areas reported slight declines What is fuelling the price increases? The upward trend is partly driven by a chronic housing shortage. 'The construction of new housing has slowed dramatically, while demand in cities like Berlin is higher than ever,' observed Dr. Michael Voigtländer, real estate expert at the German Economic Institute (IW). Government efforts to address the shortage include the so-called 'construction turbo' program , which aims to accelerate planning and approval procedures. However, the BVR warns that only 64% of housing demand will be met in 2025, with the figure expected to fall to 58 percent in 2026. Rising rents are also fuelling the demand for homeownership. READ ALSO: How you can challenge Germany's controversial property tax on your home But perhaps the most important driver behind the trend is the fall in interest rates. When interest rates rise, borrowing becomes more expensive, typically leading to lower demand for real estate and slower or negative price growth. On the other hand, falling interest rates make mortgages cheaper, stimulate demand, and support higher property prices. Recent history in Germany provides a perfect case study in how this works. Following the financial crisis in 2008, more than a decade of ultra-low interest rates fuelled a property boom in Germany, which only came to an end when the European Central Bank (ECB) raised rates in 2022–2023 to combat inflation. Advertisement The result was a sharp correction in the German property market, with nominal prices falling by nearly 7 percent in 2023. As the ECB reversed course and began cutting rates in mid-2024, mortgage rates dropped to their lowest levels in two years, and buyers and investors started returning to the market in increasing numbers. Outlook: What Comes Next? If you spend enough time in a city like Berlin, Hamburg or Munich, you will eventually hear someone say, 'I should have bought property ten years ago.' In truth, people would have been better off buying twenty years ago. According to the Deutsche Bundesbank, residential property prices in Germany only began to rise markedly after 2010, following nearly two decades of stagnation or decline. Since then, however, prices for residential property in Germany's largest cities has risen by over 33 percent, far outpacing income growth. Currently, the National Association of German Cooperative Banks (BVR) expects residential property to continue rising – by 3.2 percent in 2025 and 3.1 percent in 2026, reflecting both the rate environment and persistent supply shortages. REVEALED: Where buyers can find the most property for sale in Germany Rent controls and government incentives may moderate the pace of growth in some areas, but the underlying supply-demand imbalance remains unresolved. Meanwhile property prices have become increasingly disconnected from incomes, so the dream of owning a home has become next to impossible to realise for many people in the country. For anyone who can still afford to get on the property ladder, however, the chances are that the value of your home will continue to rise. Advertisement
Local Germany
19-02-2025
- Business
- Local Germany
REVEALED: Where buyers can find the most property for sale in Germany
Over the past two years, Germany's once booming housing market has been in a state of decline. High interest rates have made getting on the property ladder far less affordable, and many would-be buyers have returned to the cut-throat rental market instead. In 2025, however, noises from economists and real estate experts have become more positive. Inflation has been dropping, and interest rates are following suit. This means prices are rising again in some areas. Speaking at presentation for investors in Berlin in January, Michael Voigtländer, a real estate specialist at the German Economics Institute (IW) declared: "2025 will be a better property year than 2024." Explaining his view, Voigtländer pointed to sluggish construction rates and high immigration. "The growing population and rising real wages are increasing demand, which is being met by a smaller supply due to a decline in completions," he said. "In addition, the market will become more attractive due to slightly falling interest rates." Though there's unlikely to be a huge property boom this year, experts are now forecasting an increase in prices in areas where demand is high and supply is low - in other words, in most German cities. According to the Federal Statistics Office (Destatis), property prices rose by 0.5 percent in major cities in the last quarter of 2024, and also increased on average in all urban areas. In contrast, sparsely populated areas saw dips of around two percent. For people looking to get on the property ladder, this creates a tricky situation. In areas where prices are going up, there also tends to be a low number of properties on the market. Helpfully, a new analysis by real estate agents eXp Germany has tracked the regions with the most active property markets and the highest number of properties for sale. State by state, the survey tracks data from property portal ImmobilienScout24 to reveal where buyers are spoilt for choice, and where there's a dearth of options. North Rhine-Westphalia tops this list With almost 50,000 homes for sale, the western state of North Rhine-Westphalia (NRW) has by far the most properties on the market. Divided by property type, Germany's most populous state has 36,964 houses and 11,373 apartment listings at present, adding up to 48,337 properties in total. "Almost one in five houses for sale throughout Germany is located here," eXp notes. Around 250,000 are current on sale across the country as a whole. With just over 18 million residents, North Rhine-Westphalia is known as an industrialised region that's home to a cluster of German cities like Essen, Dortmund, Düsseldorf and Gelsenkirchen, all within spitting distance of one another. In that sense, it's no wonder it punches above its weight when it comes to housing. The southern states of Baden-Württemberg and Bavaria came second and third on the list respectively. Accounting for 15 percent of the German property market at present, Baden-Württemberg currently has 24,425 family homes and 14,238 apartments up for sale. That's a total of 38,663 listings. Meanwhile, Bavaria has a total of 36,642 listings, comprised of 23,354 houses and 13,288 flats. Fourth on the list was Lower Saxony, with 23,203 properties on offer, followed by Rhineland-Palatinate, with 22,015 homes on offer. Each of these states accounts for around nine percent of the current German market. Hesse, which is home to the metropolis of Frankfurt, came sixth on the list. Here, 16,767 properties were up for sale, accounting for seven percent of the property market. A chart reveals the number of properties for sale across Germany in different federal states. Source: eXp Germany and Immobilienscout City-states have competitive markets Exerting an irresistible pull on newcomers, Berlin is in a league of its own when it comes to property. Despite the challenges of the market, the capital saw prices for newbuild properties rise by 2.5 percent year-on-year in the final quarter of 2024, with prices for existing properties increasing by 2.1 percent. This could have something to do with the level at which demand is currently outpacing supply. At the time of the eXp analysis, 10,631 homes were on sale in Berlin, with 2,892 houses and 7,649 flats on offer. Interestingly, this trend held true for Germany's other two city-states: Hamburg and Bremen. In fact, both of these cities came in at the bottom of the list, with 2,917 and 1,400 properties on sale in each of the cities respectively. Of course, both of these cities are far less populous than, say, the states of Baden-Württemberg or Bavaria. That said, it appears to hold true that supply in German cities is unable to keep up with demand. Low supply in the eastern states Compared to the western states, the eXp research found that Germany's eastern states consistently had a lower supply of housing on offer. Coming in at seventh place on the list, Saxony had the most choice for buyers of all the so-called 'new' German states. In Saxony, there were 9,745 flats and 3,938 houses for sale, reaching a total of 13,683 properties - or five percent of Germany's total housing supply. Brandenburg followed with 11,049 flats and 1,126 houses, totalling 12,175 properties on offer, or around five percent of the market. Flats near the Frauenkirche in Dresden, Saxony. Photo: picture alliance/dpa | Sebastian Kahnert The supply drops further in Saxony-Anhalt (6,312 properties), Thuringia (6,261 properties), and Mecklenburg-Western Pomerania (4,689 properties). These states, which each account for around two percent of the German property market, came in at 11th, 12th and 13th place on the list. Though the supply of housing in these regions may seem small, it's worth noting that many former GDR states are more rural and have lower populations in general. That means that while there may not be much on the market, these states are also known for being much more affordable for buyers.
