Investors warm to housing, but Berlin could chill the market

German residential investor sentiment has reached its strongest level since tracking began, even as fears of political intervention climb to unprecedented highs. The Schick Immobilien Residential Investment Index rose to 59.6 points in the second half of 2025, more than twelve points above its 2023 level of 47.2 and the clearest sign yet that the sector has moved out of its post-pandemic trough. Sixty per cent of investors now plan new acquisitions in the coming twelve months, while more than 80% expect prices to remain stable or rise.

The contrast with the risk data could not be sharper. A record 85% of respondents identify further tenancy law tightening as their single greatest concern, higher than during the Mietendeckel years. Confidence and regulatory anxiety are rising in parallel, an uneasy combination for investors hoping for a more predictable policy environment.

Jürgen Michael Schick, CEO of Schick Immobilien, put the point plainly: “Investors are assessing the market soberly and based on facts. It is crucial that politicians do not jeopardise this constructive trend with unnecessary interventions.” His warning came just as Construction Minister Verena Hubertz indicated new restrictions on index-linked rents and furnished accommodation, precisely the areas investors fear will be targeted next.

Behind the headline sentiment shift lies a market that has regained its footing. Only 17% of respondents expect prices to fall in the coming year, down from nearly 24% in 2024. The proportion expecting stable prices has risen to 44%, while expectations of rising prices remain steady at around 38%. Schick summed up the shift: “Buyers and sellers are meeting on equal terms again. Market players believe prices have bottomed out and are looking ahead.”

This renewed balance is visible in strategy. Long-term portfolio management now dominates, rising from 74% to 81% of investors. Value-add approaches have risen from 19% to 33%, suggesting selective improvement rather than wholesale repositioning. Appetite for energy-efficient renovations continues to decline, falling from 30% to 25%, and construction activity remains subdued. Investors accept the need for ESG improvements but distrust the surrounding regulatory framework. As Schick noted, “What unsettles them are not the figures, but the rules.”

Policy anxiety eclipses economic risks

Geographically, capital continues to consolidate in deeper markets. Sixty-seven per cent of investors intend to buy in A-cities, up from last year, while interest in B and C locations has slipped to 37%. Surrounding metro areas remain stable at around 42%. The trend is clear: investors prefer liquidity and resilience over geographical diversification.

Berlin illustrates the long-term judgement at work. Sixty per cent of respondents view the capital as attractive or very attractive, despite its well-known political volatility. Population growth, economic strength and the city’s research base are the main positives. Yet 44% identify the political environment as the most important factor in their assessment. “The political risks are well known, but they are priced in. Anyone investing in Berlin is playing the long game,” Schick said.

The inversion in the risk hierarchy is one of the survey’s most revealing findings. While 85% fear tighter tenancy law, only 54% now cite ESG obligations, down sharply from 69% a year earlier. Concerns about interest rates, inflation and bank lending continue to fade. Only 12.5% fear further price declines, underscoring how firmly investors believe the correction has ended. Policymakers continue to push for faster climate neutrality, but only a quarter of investors plan significant energy measures in the next three to five years. Most will wait for clearer rules.

Hubertz’s recent announcements suggest more intervention is coming. Sentiment remains high because investors appear to be pricing in further regulatory pressure rather than expecting restraint. The picture that emerges is of a market recovering despite policy signals, not because of them.

For the sector, the implications are plain. Fundamentals are stabilising, demand is returning and core-city liquidity is strengthening. Yet the political overhang is now a structural feature of German residential investment. It is influencing pricing, reinforcing the appeal of prime stock in A-cities, widening the risk premium on politically exposed assets and delaying renovation-heavy strategies. Investors are betting that long-term fundamentals will outlast short-term politics. Whether that is a winning bet depends on how far Berlin decides to go.