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Recent data is increasingly confirming that Germany’s residential property market has turned a corner. After nearly two years of declining values, prices are rising again, particularly in the major cities and their surrounding regions. But the recovery remains uneven, with widening gaps between urban and rural areas, and worsening affordability for renters.
According to the Federal Statistical Office (Destatis), residential property prices rose by 3.8% year-on-year in the first quarter of 2025, following a 1.9% increase in the final quarter of 2024. This marks the second consecutive quarterly gain after a prolonged slump dating back to late 2022.
Pekka Sagner of the German Economic Institute (IW) observed that the market is entering a new phase. Purchase prices are no longer falling across the board, he said, but are now developing very differently depending on the region.
Urban centres remain the primary drivers of growth. Cologne recorded the strongest quarterly gain in Q2 2025, up 3.3%, followed by Essen, Düsseldorf and Frankfurt, all showing growth above 2%. Condominiums (owner-occupiers) rose by 2% on average across Germany, according to IW, with even stronger momentum in cities outside the top seven markets. For single- and two-family houses, national prices increased by 3% year-on-year, with suburbs of large cities rising 3.8%.
The Europace EPX index for June 2025 showed that condominium prices climbed a further 0.33% compared to May. Over the year, condo prices rose 3.24%, driven by strong markets in cities such as Berlin and Düsseldorf. In contrast, prices for new and existing houses slipped slightly month-on-month, though the broader trend remained positive: year-on-year, new-build houses gained 1.6%, and existing homes 2.6%.
Meanwhile, the Empirica Index confirmed the same pattern. Advertised prices for new condominiums rose 0.7% quarter-on-quarter and 2.6% year-on-year nationwide. Since the interest rate pivot in 2022, prices for new builds are up 4%, while existing apartment units remain down 9% over the same period.
The shift in buyer interest toward suburban homes is also reflected in listing data. The online portal Kleinanzeigen.de reported that house listings rose 21.9% nationwide between April 2024 and April 2025, with particularly strong growth in Saxony, Brandenburg and Berlin. Condominium listings, by contrast, declined 5.6% nationally, with the sharpest drops in Saarland, Rhineland-Palatinate and North Rhine-Westphalia. The one exception was Berlin, where apartment listings increased slightly.
While for-sale markets show signs of stabilisation, rent inflation continues to place pressure on households. The IW Index reports that advertised rents rose 3.8% year-on-year in Q2 2025, a slowdown from last year’s rate but still well above inflation. The strongest increases were in mid-sized cities and their surrounding regions, both above 4%. The top seven cities saw a more modest rise of 2.6%.
Empirica data suggest that new-build rents rose by 4% year-on-year and 16% since mid-2022, with growth recorded in roughly two-thirds of all districts, including rural areas outpacing some cities. Europace data, monitored by Value AG, confirm that rental apartments rose 5.8% year-on-year in Q2 2025.
Sebastian Hien of Value AG described the market as having entered a stable growth phase. Prices are not expected to decline in the foreseeable future, he said, except possibly in regions with high exposure to the automotive sector, where uncertainty is already visible in price movements.
The affordability gap continues to widen. According to the Housing Atlas by Postbank and the Hamburg Institute of International Economics, a Berlin household now spends 43.3% of disposable income on mortgage servicing for a 70-square-metre apartment. This is nearly identical to Munich’s 43.6%, despite lower average purchase prices in the capital. Berlin also ranks ahead of Munich in terms of rental burden: 27.1% of income goes to net cold rent, compared with 25.5% in the Bavarian capital.
Other university towns such as Freiburg, Heidelberg and Potsdam also rank high in unaffordability. Meanwhile, many regions in eastern and northern Germany remain comparatively affordable, with fewer than 15% of household incomes needed to service a standard mortgage.
For investors, the outlook is cautiously constructive. Most market indices now confirm a broad stabilisation in purchase prices, with modest growth in high-demand regions. Rents are climbing steadily, especially in new-build segments, providing support for income-driven strategies. But structural imbalances remain: new construction is lagging, the supply of affordable units is shrinking, and price momentum is diverging sharply between regions.
The overall picture is one of stabilisation rather than recovery. Housing markets may no longer be in free fall, but neither are they broadly accessible. For now, Germany’s residential sector remains locked in a tension between capital value recovery and deepening social strain.
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