Main information
- The German residential real estate market shows continuous stabilization signs after the recent crisis.
- Apartments prices increased on an average of 1.2 percent in quarterly sliding from January to March.
- The rents offered increased by 1.2 percent in quarterly sliding during the first three months of 2025.
The German residential real estate market shows continuous stabilization signs after the recent crisis, the prices having experienced a significant increase in the first months of the year. However, uncertainties remain regarding future evolution.
According to a study by the Institute of the German Economy (IW) communicated to Reutersthe prices of apartments have increased an average of 1.2 percent in quarterly sliding from January to March, marking the strongest growth since spring 2022. Unibumous and bibarial houses have experienced an even greater increase of 2.3 percent, the highest increase in three years. Compared to the quarter of the previous year, the prices of these goods increased by 2.9 percent.
Cautious recovery of the housing market
IW economists, Pekka Sagner and Michael Voigtländer, attribute this development to market stabilization, probably influenced by slightly lower financing costs and a continuous demand for home ownership, in particular in existing real estate. Cities like Essen (6.3 percent) and Leipzig (5.8 percent) have increased particularly strong price increases. Cologne was an exception, with a slight drop of 0.3 percent.
Although these recent price movements suggest a potential reversal of the trend, the IW warns against final conclusions. Many market players remain sensitive to prices and economic conditions are still full of uncertainties. The current dynamics do not resemble the exuberance of previous splendid years.
Increase in rents
The rental housing market shows no sign of relaxation. The rents offered increased by 1.2 percent in quarterly sliding during the first three months of 2025 and 4.3 percent compared to the same period last year, against 4.7 percent in the fourth quarter and 5.3 percent in the third quarter of 2024.
This moderation of rent growth follows a slight weakening of the dynamics of wages due to the persistent weakness of the economy. However, the market remains dynamic, with persistent demand exceeding the supply of available housing, especially in metropolitan areas and economically attractive regions. Economic uncertainties have not yet significantly slowed down the demand for rental housing.
-Leipzig (7.7 percent) leads the annual rent increases, followed by Essen and Frankfurt (6.1 percent each) and Düsseldorf (5.8 percent). Hamburg, Munich and Stuttgart also recorded substantial increases of approximately 4.9 and 4.6 percent respectively. The Berlin rate slowed down to 3.0 percent after a period of strong growth, while Cologne (3.5 percent) and Dortmund (3.7 percent) remained below average.
Impact of Trump’s trade policies
The IW warns that the trade policies of American president Donald Trump, characterized by high customs duties on imports, could also influence the German real estate market. Uncertainties in international trade are reflected in fluctuations from the labor market, which could slow demand in the commercial real estate sector. New customs duties on essential building materials such as steel and aluminum would increase construction costs. The constant disruptions of the supply chain contribute to delays and cost -effects in new construction projects.
These factors intensify the conditions of investment in the new construction sector while increasing the pressure on the existing housing stock, which could lead to an increase in prices.
Financial market volatility
Increased uncertainty in the financial markets leads to an increase in volatility and a flight to assets perceived as safe, in particular German state obligations. This temporarily improves financing conditions on the real estate market. However, Trump’s conflicting trade policies contribute to inflationary pressures, which central banks could counter interest rate hikes.
In the long term, this would lead to an increase in financing costs, which would make purchases of housing and investments in residential construction more difficult.
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