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What will happen in Frankfurt’s real estate market? Will prices go up or down? Is Frankfurt still a hotspot for foreign investors? How is Germany’s government impacting real estate policies and taxes in 2025?
We’re constantly asked these questions because we’re deeply involved in this market. Through our work with real estate agents, property developers, and clients who buy properties in Frankfurt, we’ve gained firsthand insights.
That’s why we created this article: to provide clear answers, insightful analysis, and a well-rounded perspective on market predictions and forecasts.
Our goal is simple: to ensure you feel informed and confident about the market without needing to look elsewhere. If you think we missed the mark or could do better, we’d love to hear your thoughts. Feel free to message us with your feedback or comments, and we’ll work hard to improve this content for you.
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1) More Asian investors will buy in Frankfurt as they diversify their portfolios
Asian investors are increasingly eyeing Frankfurt properties as they aim to diversify their portfolios.
In 2023, there was a notable shift with Asian and Pacific cross-border capital investment into Europe rising by 26%. This trend underscores a growing interest in European real estate, with Frankfurt standing out as a prime target.
Frankfurt's allure lies in its status as a major financial hub, home to the European Central Bank. The city boasts a highly connected infrastructure, including DE-CIX, the world's largest internet exchange. This connectivity, coupled with more direct flights from major Asian cities, makes Frankfurt even more appealing.
The city's robust economic performance and low unemployment rates create a stable investment environment. Investors are particularly drawn to Frankfurt's commercial real estate market, which is thriving, especially in the data center sector.
This sector is rapidly expanding and attracting investment-grade customers, further enhancing Frankfurt's attractiveness. The city's infrastructure and economic stability make it a compelling choice for those looking to invest in Europe.
With these factors in play, it's no surprise that Frankfurt is becoming a focal point for Asian investors seeking to diversify their portfolios and capitalize on new opportunities.
Sources: Statista, Digital Core REIT Investor Presentation, Deutsche Wealth
2) Rental yields in the city center will drop as property prices rise faster than rents
In Frankfurt's city center, rental yields are expected to decline as property prices rise faster than rents.
Over the past few years, property prices have surged significantly, leaving rent growth trailing behind. For example, between 1990 and 2022, apartment prices jumped by 175.4%, while rents for new contracts only saw a 98.2% increase.
In 2023, the Federal Statistical Office noted that existing rents went up by just 2%, a figure dwarfed by the rise in property prices. Even with new rentals climbing by up to 6.5%, they still couldn't keep up with the property price inflation.
Real estate agencies have pointed out this growing gap between property price hikes and rent growth. In early 2024, Frankfurt's gross rental yields averaged a low 3.63%, a drop from historical norms.
This decline in rental yields is a direct result of rising property prices. Economic forecasts suggest that property prices will continue to inflate, with stable yields and rent growth struggling to keep pace.
For potential buyers, this means that investing in Frankfurt's city center might not yield the returns it once did, as property prices continue to outstrip rent growth.
Sources: Global Property Guide, Deutsche Wealth, DWS
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Germany versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
3) City center rents will keep rising because demand is high and supply is limited
Rents in Frankfurt's city center are on the rise due to high demand and limited supply.
Frankfurt's population is set to grow from 776,349 in 2023 to over 827,000 by 2035, driven by an influx of professionals and expatriates. This surge in residents naturally boosts the demand for housing, as more people need places to live.
The housing market in Frankfurt is tight, with shortages across almost all segments. This means there aren't enough new developments to keep up with the growing population, putting pressure on the existing housing stock.
In central Frankfurt, vacancy rates are low, indicating that available housing is fully utilized. This situation allows landlords to charge higher rents because the limited supply can't meet the increasing demand.
With the city's vibrant economy and job opportunities, more people are drawn to Frankfurt, further intensifying the demand for housing. The limited availability of new housing developments means that the existing housing stock is under pressure to meet the rising demand.
As a result, rents in the city center are expected to keep climbing, making it a competitive market for potential renters.
Sources: Stadtplanungsamt Frankfurt, PGIM Real Estate 2024 Global Outlook
4) Property values will be affected as new environmental rules boost energy-efficient building development
In recent years, Germany has introduced new environmental regulations that are pushing for more energy-efficient buildings. For example, the Building Energy Act (GEG) was amended to require new buildings to meet stricter energy efficiency standards by 2023. This means that any new construction must be significantly more energy-efficient than before, which is a big step towards reducing energy consumption and emissions.
Additionally, starting in 2024, any new heating systems installed must source at least 65% of their energy from renewable sources. This effectively bans the use of fossil-based heating systems in new buildings, encouraging the adoption of cleaner, more sustainable energy solutions. These regulations are not just about reducing emissions; they also make energy-efficient buildings more attractive to buyers and investors.
We've seen a clear trend where properties with high energy efficiency ratings, like those in classes A and B, have increased in value. In fact, property prices for these classes rose by 2.2% in the last quarter of 2023 compared to the same period in 2022. This shows that there's a growing demand for energy-efficient homes, driven by both environmental awareness and the financial benefits they offer, such as lower operating costs and reduced risk of value adjustments.
Sources: The Influence of Energy Efficiency on the Sales Value of a Property, Germany to Tighten Energy Efficiency Requirements for Buildings
5) More foreign buyers will invest in Frankfurt’s housing market because of its stable economy and growth potential
Frankfurt's residential market is becoming increasingly attractive to foreign buyers, and there are several reasons for this trend. First, even though property prices in Frankfurt have seen some fluctuations, they remain relatively stable and have shown growth compared to other German cities. This stability is appealing to investors looking for reliable markets.
Moreover, the city has witnessed significant foreign investment in its real estate sector. In 2024 alone, €2.5 billion was invested in Frankfurt, highlighting the city's appeal to international investors. This influx of foreign capital is a strong indicator of confidence in Frankfurt's market.
Frankfurt's status as a major financial hub also plays a crucial role. Since Brexit, many financial institutions have moved their operations to Frankfurt, reinforcing its position as a key financial center in Europe. This has attracted both domestic and international investors, further boosting the city's real estate market.
Additionally, the low vacancy rates in Frankfurt's residential market suggest strong demand, which is likely to attract more foreign buyers. The city's economic growth indicators, such as strong wage growth and increasing household incomes, further enhance its attractiveness to investors.
Sources: CBRE News, IAmExpat, BSO Insights, Rabobank
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6) More UK buyers will invest in Frankfurt real estate due to Brexit
Brexit has reshaped the financial landscape, pushing many UK financial institutions to set up shop in Frankfurt.
Take JPMorgan Chase & Co., for example, which moved a whopping $230 billion in assets to Frankfurt. This isn't just a minor shift; it's a clear sign that Frankfurt is becoming a major player in the financial world. With more UK companies needing a strong EU presence, Frankfurt's real estate market is heating up.
Frankfurt is thriving as a financial hub, with nearly 60 new licences issued to banks and financial service providers. This growth is a magnet for UK investors eager to diversify their portfolios. The city's appeal is undeniable, especially for those looking to maintain a foothold in the eurozone.
Property prices in Frankfurt are on the rise, attracting international investors. While London grapples with Brexit challenges, Frankfurt offers stability and a booming financial sector. This makes it a prime choice for UK-based buyers seeking alternatives.
Frankfurt's real estate market is not just about numbers; it's about opportunity. The city's growing status as a financial center is drawing in UK investors who see the potential for growth and stability. Brexit has opened doors for those looking to invest in a thriving market.
As more financial institutions make their way to Frankfurt, the demand for office space and real estate continues to climb. This trend is expected to persist, driven by the need for companies to secure their EU operations. Frankfurt is becoming the go-to destination for UK investors.
Sources: Bloomberg, Germany Finance, The Luxury Playbook
7) Demand for eco-friendly properties will grow as sustainability becomes a priority for consumers
In recent years, we've seen a noticeable shift in consumer preferences towards eco-friendly properties, especially among those who are conscious about sustainability. This trend is particularly evident in cities like Frankfurt, where the demand for green-certified buildings has surged. By 2024, Frankfurt boasted the highest proportion of certified office space, with 27% of its total office stock being green-certified. This significant increase from previous years highlights a growing consumer demand for properties that prioritize sustainability.
Moreover, the real estate market in Frankfurt has been driven by both market demand and regulatory pressures, pushing the sector to focus on sustainability. Buyers and tenants are increasingly seeking properties that offer energy efficiency and a reduced environmental impact. This shift is further supported by consumer surveys, such as the 2024 Sustainability Survey by the National Association of REALTORS, which found that nearly half of the respondents noted their clients' interest in sustainable living. This indicates a broader societal move towards eco-conscious lifestyles.
Additionally, local government policies in Frankfurt are promoting sustainable urban development, encouraging the use of renewable energy sources and energy-efficient appliances. These policies not only support the growth of eco-friendly properties but also align with the heightened awareness of climate change impacts on property values. As a result, sustainability-conscious consumers are more likely to prioritize properties with eco-friendly features, recognizing the long-term benefits of such investments.
Sources: JLL CESAR Report 2024, NAR 2024 Sustainability Report, Generali Real Estate Sustainability Report 2024
8) Frankfurt’s home prices will keep rising due to low supply and high demand
Frankfurt's residential property prices are expected to keep rising due to a combination of limited supply and high demand. One of the main reasons is the city's growing population, which has been increasing at a rate of 0.51% annually. This growth naturally leads to a higher demand for housing as more people move into the area.
Additionally, Frankfurt is a major financial hub, attracting international companies and financial institutions. This influx of professionals and expatriates further boosts the demand for housing. The low vacancy rates in the residential property market also indicate a tight market, where the demand for homes exceeds the available supply.
Historical data supports this trend, showing that property prices in Frankfurt have consistently increased over the years. In fact, nominal housing prices are more than 60% above their levels from five years ago. The limited availability of land for new developments exacerbates the situation, as there are few opportunities to build new housing to meet the growing demand.
Sources: World Population Review, Capital.com, JLL Germany
We have made this infographic to give you a quick and clear snapshot of the property market in Germany. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Middle Eastern buyers will target luxury properties in Frankfurt for safe investments
Middle Eastern buyers are increasingly focusing on luxury properties in Frankfurt as a safe investment haven for several reasons.
Firstly, the geopolitical instability in the Middle East has heightened the demand for secure investment opportunities. This is evident from the Julius Baer Global Wealth and Lifestyle Report 2024, which highlights that affluent individuals are investing in assets that provide stability, such as luxury real estate in robust economies. Frankfurt, with its strong economy, fits this criterion perfectly.
Additionally, Frankfurt's growing reputation as a financial hub post-Brexit has made it an attractive destination for international investors. The Global Financial Centres Index ranks Frankfurt as the most important financial center in continental Europe, surpassing other cities like Luxembourg and Paris. This status enhances its appeal as a stable and economically strong city for investment.
Moreover, the Knight Frank Wealth Report 2024 confirms a rise in the number of ultra-high-net-worth individuals from the Middle East investing in European real estate. This trend is likely to continue, with Frankfurt being a prime location due to its robust economy and quality of life.
Sources: Knight Frank Wealth Report 2024, Julius Baer Global Wealth and Lifestyle Report 2024, Global Financial Centres Index
10) Young professionals will increasingly seek micro-apartments for affordable urban living
Micro-apartments are becoming a hit among young professionals looking for affordable city living, especially in vibrant places like Frankfurt.
Frankfurt has seen a big jump in demand for affordable housing, thanks to a wave of young professionals moving in. Since 2011, the city has added over 62,500 new residents, but only 14,200 new apartments have been built. This mismatch between demand and supply is pushing the need for more budget-friendly options like micro-apartments.
Property prices in central Frankfurt are climbing, making traditional apartments harder to afford for young professionals. For example, the rent in the Innenstadt III district is among the highest in the city, nudging young folks to consider more affordable choices like micro-apartments.
Many young professionals are drawn to city life for its convenience and lifestyle perks. Micro-apartments in Frankfurt come fully furnished with modern amenities, including fast Wi-Fi and smart technology, making them a perfect fit for this crowd.
These compact living spaces are not just about saving money; they offer a lifestyle that aligns with the fast-paced, tech-savvy preferences of young urbanites. The trend is catching on as more people see the value in living small but smart.
As the city continues to grow, micro-apartments are likely to become even more popular, offering a practical solution to the housing crunch while catering to the modern needs of young professionals.
Sources: World Economic Forum, JLL Germany, Tranio
11) Yields on luxury rentals will drop because the market is oversupplied
In recent years, high-end rental properties in Frankfurt have faced challenges due to an oversupply in the luxury market. One key indicator of this oversupply is the rising vacancy rates. By the end of September 2024, the vacancy rate in Frankfurt's office market, which includes high-end rentals, increased to 9.2% from 8.6% earlier that year. This suggests that there are more luxury properties available than there are tenants to fill them.
Another contributing factor is the significant increase in the construction of high-end residential units. In 2024, the top markets in Germany, including Frankfurt, saw an 8.9% increase in new luxury properties compared to the previous year. This surge in new supply has added to the existing inventory, exacerbating the oversupply issue.
Real estate agencies have also reported a slowdown in demand for luxury rentals. For instance, Jones Lang LaSalle (JLL) noted a lack of major deals in 2024, with many requests being postponed. This indicates that potential tenants are either delaying their decisions or looking elsewhere, further impacting the demand for high-end properties.
Sources: JLL, Market Screener, Julius Baer
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12) Prices for entry-level homes will rise steadily as more first-time buyers enter the market
Entry-level properties in Frankfurt are on the rise as more first-time buyers step into the market.
Frankfurt's appeal as a major financial hub and cultural hotspot is drawing in new residents, boosting housing demand. The city's strong economy and job opportunities are key factors attracting people, which in turn fuels the need for more homes.
With the population of Frankfurt expected to hit 800,529 residents in 2024, the city is experiencing steady growth. This increase is largely due to migration, which is a significant driver of the housing demand. As more people move in, the pressure on entry-level properties intensifies, nudging prices upward.
Low interest rates have made mortgages more accessible, encouraging first-time buyers to dive into the market. Even if rates fluctuate, they remain relatively low, which supports the ongoing demand for these properties. Plus, limited land availability for new developments means that as demand outstrips supply, prices naturally climb.
Historically, Frankfurt has seen property prices grow consistently, with real estate appreciating by 2% to 6% annually over the long term. This trend suggests that prices will continue to rise. Real estate agencies in the city are also noticing increased interest from first-time buyers, signaling a robust market for entry-level homes.
Sources: World Population Review, IamExpat
13) Property prices in Niederrad will fall as new developments focus elsewhere
The Niederrad district in Frankfurt is seeing a shift in property market dynamics, with property prices expected to decline as new developments focus elsewhere.
In the first half of 2023, apartment prices per square meter in Niederrad dropped by 10.4% compared to the same period in 2022. This decline is a clear sign of decreased investment in the area.
Meanwhile, the spotlight is on other parts of Frankfurt, like the city center, where the FOUR Frankfurt project is underway with a €1 billion investment. This massive development is set to be completed by 2025, drawing attention and resources away from Niederrad.
Real estate agents are noticing a trend: buyer interest in Niederrad is waning. This is evident from the falling purchase prices and the relatively modest rental increases compared to other districts.
As preferences shift, more central areas are becoming the go-to spots for property buyers, leaving Niederrad less appealing.
With these changes, it's clear that Niederrad is losing its competitive edge in the property market, as new developments and investments are directed elsewhere.
Sources: VON POLL IMMOBILIEN, Construction Briefing
14) Tech-savvy buyers will be drawn to new developments featuring standard smart home technology
In recent years, smart home technology has become increasingly popular in Germany, with nearly half of all households adopting some form of smart home application by 2023. This trend is expected to continue, as the market is projected to grow significantly, reaching $13.2 billion by 2029. This growth is largely driven by consumer demand for energy-efficient and automated home solutions, which offer both convenience and cost savings.
German consumers are particularly interested in smart home devices that help save energy and enhance security. For example, smart heating systems can adjust room temperatures based on real-time occupancy, reducing energy waste and lowering utility bills. This focus on energy efficiency aligns with broader environmental goals and government incentives, such as the German Buildings Energy Act, which encourages the adoption of smart home technologies.
Surveys have shown that a significant number of potential home buyers are willing to pay more for homes equipped with smart technology. In fact, around 70% of home buyers are actively seeking smart homes, attracted by the convenience, time savings, and enhanced security these technologies offer. This preference is also reflected in the rental market, where over 82% of renters desire at least one smart device or system in their homes.
Real estate listings in Frankfurt are increasingly highlighting smart home features as key selling points, responding to the growing awareness and demand among buyers. Additionally, partnerships between tech companies and real estate developers ensure that new developments are equipped with the latest smart home technologies, providing a seamless and integrated living experience for residents.
Sources: Exploding Topics, Statista, Markets and Markets
We made this infographic to show you how property prices in Germany compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
15) Property values in Ostend will rise significantly as it transforms into a cultural and creative hub
The Ostend area is set to become a cultural and creative hotspot, leading to a rise in property values.
With the establishment of places like Frankfurt's Creative Industries Competence Centre, Ostend is attracting creative professionals and businesses. This centre offers support and networking, making it a magnet for those in the creative field.
The local government is also on board, pushing initiatives to promote Ostend as a cultural hub. The City of Frankfurt am Main has a master plan to boost the creative economy, which could mean more targeted efforts to enhance Ostend's appeal.
Art galleries and creative businesses are popping up all over Ostend, signaling its growing cultural importance. As these businesses thrive, they create a demand for both residential and commercial properties, which in turn drives up property values.
Improved public transportation links are making Ostend more accessible, drawing in tourists and new residents. This increased connectivity not only benefits local businesses but also boosts property values in the area.
Ostend's transformation into a cultural hub is not just a trend; it's a strategic move supported by both public and private sectors, making it a prime spot for property investment.
Sources: Frankfurt Business, Meet Frankfurt
16) Rental yields in suburban areas will rise as more families look for affordable housing options
Families are increasingly moving to the suburbs as property prices in central Frankfurt continue to rise.
Suburban areas offer larger living spaces at more reasonable prices, making them an attractive option for those seeking affordability. This shift is not just about cost; it's about finding a home that fits a family's needs without stretching their budget too thin.
With the demand for bigger homes on the rise, suburban population growth is evident as more people leave the city for surrounding districts. This trend is reshaping the housing market, as families prioritize space and comfort.
Improved infrastructure and transportation links have made suburban living even more appealing. Better public transport and energy supply enhance the quality of life, making these areas a top choice for families.
Surveys highlight that families are drawn to the suburbs for these reasons, redefining the concept of home in today's real estate landscape. The appeal of suburban living is clear, with its blend of space, affordability, and convenience.
As more families seek these benefits, suburban areas are expected to see an increase in rental yields. This trend is a response to the growing demand for affordable housing options outside urban centers.
Sources: Global Property Guide, IAmExpat, TenantCloud
17) Mid-range property prices in Frankfurt will drop slightly as buyers look for cheaper options
In recent years, we've seen a noticeable shift in the real estate market in Frankfurt, particularly affecting mid-range properties. One of the main reasons for this is the rising interest rates, which have made mortgages more expensive. This increase in borrowing costs has reduced the purchasing power of many potential buyers, leading to a cooling demand for mid-range properties.
Additionally, there has been a significant effort to increase the supply of new housing developments in Frankfurt. For example, projects like the Wohnquartier Franky in Gallus and the Quartier Oststern in Ostend are expected to add a substantial number of new units by 2025. This increase in supply could lead to a slight decline in prices as more properties become available on the market.
Another factor contributing to this trend is the demographic shift towards smaller household sizes and the urban-to-suburban migration. Many people are moving to suburban areas in search of more affordable living options, which reduces the demand for mid-range properties in the city. This migration pattern, combined with economic uncertainties that impact buyer confidence, further contributes to the potential decline in property prices.
Sources: JLL Germany, IamExpat
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility. Finally, please note that we are not affiliated to any of the sources provided. Our analysis remains then 100% impartial.