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What will happen in Germany’s real estate market? Will prices rise or fall? Is Berlin still a prime location for international investors? How is Germany’s government shaping real estate policies and taxes in 2025?
We’re frequently asked these questions because we’re deeply engaged in this market. Through our collaborations with real estate agents, property developers, and clients purchasing properties in Germany, we’ve gathered firsthand insights.
That’s why we crafted this article: to deliver clear answers, insightful analysis, and a comprehensive perspective on market predictions and forecasts.
Our aim is straightforward: 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) Germany’s home prices will grow slowly thanks to a stable economy
Germany's residential property market is poised for moderate growth due to stable economic conditions.
With the employment rate hitting a record high of 77.50% in late 2023 and staying strong at 77.40% in 2024, people feel more confident about buying homes. This high employment level means more folks have the purchasing power to invest in property, which keeps the housing market buzzing.
Interest rates, which were quite high in 2023, have now settled down, making loans and mortgages more affordable. This change is a big deal because it makes borrowing cheaper, encouraging more people to invest in homes. In cities, the demand for housing is climbing, but there's not enough new housing being built. This mismatch can lead to property values going up over time.
The government is also stepping in with incentives for homebuyers, like tax breaks and subsidies, which create a more predictable investment environment. These measures make the market more appealing to investors looking for stable returns. Plus, Germany's economy is holding strong with steady GDP growth and low unemployment, which supports the housing market's gradual recovery.
In urban areas, the limited supply of new housing against rising demand is a key factor. This scarcity, combined with high demand, can drive property value appreciation over time. It's a classic case of supply and demand, where the limited availability of homes in popular areas pushes prices up.
Overall, the combination of stable economic conditions, government incentives, and a strong employment rate creates a favorable environment for the housing market. Investors and homebuyers alike can expect a secure and attractive market for their investments.
Sources: Trading Economics, IP Global
Our team found this video showing property prices declining but signs of bottoming out, with expectations for moderate growth due to economic stability.
2) Foreign investors will focus more on sustainable and energy-efficient properties in Germany
Foreign investors are increasingly drawn to sustainable and energy-efficient properties in Germany.
Germany has rolled out major regulations and incentives to boost energy efficiency in buildings. The Federal Subsidy for Efficient Buildings (BEG) is a game-changer, offering low-interest loans and bonuses that make green investments more attractive. This initiative is a big win for investors looking to save money while going green.
Since 2024, the Building Energy Act (GEG) requires new heating systems to use at least 65% renewable energy. This law pushes for energy-efficient homes, which are becoming more popular as energy costs rise. Buyers are now on the lookout for properties that promise long-term savings on energy bills.
Investing in sustainable properties is not just good for the planet; it's financially smart. In 2022, around €11.2 billion was poured into certified green buildings in Germany. This shows a strong financial interest in eco-friendly real estate, especially from institutional investors who prioritize ESG criteria.
These investors are not just following a trend; they are responding to a market that values sustainability. The demand for green buildings is growing, and with it, the potential for solid returns on investment. This shift is reshaping the real estate landscape in Germany.
As more investors jump on the sustainability bandwagon, the focus is on properties that meet these new standards. The combination of financial incentives and consumer demand is driving this change, making sustainable real estate a hot commodity.
Sources: Federal Subsidy for Efficient Buildings (BEG), Green Building Certification Systems, Germany Energy Efficiency & Trends Policies
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.
3) Rent prices in Munich will drop slightly as new housing projects finish
Munich is seeing a 12.3% increase in building permits this year, hinting at more homes on the horizon.
With the city pouring two billion euros into new housing projects, there's a big push for affordable and eco-friendly living spaces. This effort, part of the "Wohnen in München VII" plan, aims to ease the rental market's pressure.
Looking back, Munich's rent prices have shown a pattern: when more homes are built, rent prices tend to stabilize or drop. After a building boom in 2020, rents leveled off as the housing supply caught up.
Real estate experts, including those from Cushman & Wakefield, predict that Munich's rental market recovery will be slower than expected. They don't foresee strong growth until mid-2025, which supports the idea of a slight dip in rent prices.
As new housing projects wrap up, rent prices might see a slight decline, offering potential buyers a more balanced market. This trend is backed by historical data and expert insights.
For those considering buying property in Munich, this could mean more options and potentially better deals as the market adjusts to the increased supply.
Sources: Destatis, Cushman & Wakefield, JLL
4) Rent growth in rural areas will stagnate as more people move to cities
Rural areas in Germany are seeing stagnant rent growth as more people flock to urban centers.
With the population in rural regions expected to decline by 3.3‰ annually from 2023 to 2051, fewer people are living there, which means less demand for rental properties. This shift is making cities like Munich and Frankfurt more appealing, where 77.77% of Germany's population already lived by 2023, drawn by better job opportunities and vibrant economic activities.
Young Germans are particularly keen on city life, thanks to the better access to services and amenities that urban areas offer. Surveys show this preference, which is driving up property prices and rent in cities, making them more attractive to potential renters compared to rural areas.
Infrastructure development is heavily focused on urban areas, enhancing living conditions and services that draw in more residents. Meanwhile, rural areas struggle with aging populations and limited job opportunities, as often highlighted in media and demographic studies.
These challenges in rural regions contribute to their economic stagnation, leading to stagnant rent growth. The government reports internal migration trends that favor cities, boosting urban populations while rural areas continue to decline.
As urbanization continues, the economic impact of rural depopulation becomes more evident, with rural areas facing stagnant rent growth due to these demographic shifts.
Sources: Global Angle, Statista, Eurostat, DZ Hyp Residential Market Report
5) Rental yields in Frankfurt will rise slightly as more international workers move to the city
Frankfurt is seeing a slight increase in rental yields as more international workers are drawn to the city.
Why is this happening? Well, it's because international companies are setting up shop in Frankfurt, especially in booming sectors like life sciences and finance. Big names like BioNtech, Merck, and Sanofi are already here, pulling in a diverse crowd from all over the world.
Frankfurt's financial services industry is a big draw for international talent. As a top European financial hub, the city is also a thriving fintech center, attracting professionals from various countries. This influx of talent is pushing up the demand for rental properties.
On the housing front, things are looking up. The market is stabilizing, and there's been a 24% rise in new apartment completions in 2023 compared to last year. This shows a growing appetite for rental housing, fueled by the city's ongoing improvements in infrastructure and public transport.
These infrastructure upgrades make Frankfurt an even more attractive place to live and work. The city's efforts to enhance public transport and connectivity are paying off, making it easier for people to move around and settle in.
Sources: FRM United, JLL Research, Frankfurt Green City
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6) Hamburg’s rental yields will grow steadily as supply and demand remain balanced
Hamburg's rental market is set for steady yield growth thanks to a balanced supply-demand ratio.
Over the past year, rental prices in Hamburg have climbed, showing a strong demand against limited supply. This trend highlights the market's dynamics, where more people are looking for homes than there are available. The city's growing population is a key factor, as it naturally boosts the demand for rental properties, ensuring a consistent need for housing.
Low vacancy rates in Hamburg are telling. With only 29 rental flat offers for every 1,000 requests, the high demand and limited availability of rental properties are evident. This scarcity is a clear sign of why rental prices are on the rise.
Hamburg's job market is another driving force. With strong sectors like manufacturing and logistics, the city enjoys economic stability, attracting more tenants willing to pay higher rents. This economic strength is a backbone for the rental market's growth, as people flock to the city for work opportunities.
The city's appeal as a place to live and work is often highlighted in media coverage, adding to the high demand for rentals. People are drawn to Hamburg not just for jobs but for its lifestyle, making it a hot spot for renters.
Sources: Air Inc., HCOB Bank, Realogis, Intertraffic
7) Rental yields in Munich will drop as high property prices discourage new investors
Munich is now one of Germany's priciest cities, with property prices hitting €7,600 to €8,000 per square meter in 2024.
In trendy areas like Altstadt-Lehel and Schwabing, prices are steady at over €10,000 per square meter. This makes it tough for new investors to jump in. Rental yields in Munich have been slipping, with 2024 figures showing yields between 2.88% and 4.14%, which is less appealing than other big German cities.
Take Hamburg, for instance, where rental yields are a bit better, ranging from 2.12% to 4.16%. This difference underscores why Munich's returns aren't as enticing. The city's high demand and limited property supply have pushed prices up, creating a hot market.
UBS warns that Munich's real estate market is at serious bubble risk. This scares off new investors who worry about high entry costs and potential price drops. Real estate agents say investor hesitancy is growing, with many wary of the steep price hikes seen up to 2022.
Interest rates have shot up, causing a dip in residential property investments. This uncertainty about price corrections and future interest rates keeps new investors at bay. Munich's market is a tricky one, with high prices and low yields making it less attractive for fresh faces.
Sources: Mr. Lodge, IAmExpat, DZ HYP, Global Property Guide
8) Munich’s real estate market will slow down as high prices drive buyers to cities like Augsburg
Munich's real estate market is known for its sky-high property prices, making it one of Germany's priciest cities.
In the heart of Munich, the cost per square meter is over €10,000, while areas like Moosach or Laim see prices between €6,500 and €7,500. These figures have shaped the market, pushing many potential buyers to look elsewhere.
With such steep prices, buyers are increasingly eyeing more affordable options in nearby cities. Augsburg, for example, has become a popular choice due to its lower property prices. This isn't just a preference; for many, it's a necessity as they find themselves priced out of Munich.
Living in Munich isn't just about high property prices; the overall cost of living is also significantly higher than in places like Augsburg. This cost disparity is a big reason why people are considering a move to more budget-friendly areas.
As more residents migrate from Munich to surrounding cities, the demand for properties within Munich is likely to decrease. This trend suggests a potential slowdown in Munich's real estate market.
Sources: Mr. Lodge, ASEAN UP, I Am Expat
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.
9) Property prices in Dresden will rise as it grows into a cultural and educational center
Dresden is quickly becoming a hotspot for culture and education, leading to a noticeable rise in property prices.
The city has seen a 90.70% increase in average property sale prices, showing that more people want to live there. This surge is likely because of Dresden's rich cultural scene and educational opportunities. The city hosts events like the Semperopernball and the Dresden Short Film Festival, which not only draw crowds but also boost the local economy, making it a more appealing place to settle down.
With a growing student population at Technische Universität Dresden, the demand for housing is on the rise. The university's expanding enrollment numbers mean more students and faculty are looking for places to live, pushing property prices up. This influx of students and professionals is a key factor in the city's booming real estate market.
Dresden's educational and research facilities are expanding, further cementing its status as a cultural and educational hub. The presence of a major university with extensive facilities attracts a diverse crowd, enhancing the local housing market. New cultural projects, like the Moritzburg Festival, are continuously being developed, adding to the city's allure and drawing more residents and businesses.
These developments are not just about numbers; they reflect a vibrant community that's growing and evolving. The city's cultural and educational offerings are making it a desirable place to live, work, and invest. As Dresden continues to enhance its cultural landscape, the demand for property is expected to keep rising.
Sources: Dresden Housing Market Data, Culture, events 2024 / 2025 and tourism in Dresden, Technische Universität Dresden Ranking & Overview 2024
10) Airbnb-style investments in Germany will become less profitable due to new short-term rental regulations
In Germany, new regulations on short-term rentals are shaking up the Airbnb market.
In cities like Berlin, Munich, and Stuttgart, hosts are now facing strict limits on rental days. For example, in Berlin, you need a permit to rent out an entire property, and second homes can only be rented for a maximum of 90 days per year. Munich is even stricter, allowing only eight weeks of short-term rentals annually without special permission.
These rules mean fewer chances for property owners to make money from short-term rentals, which can hit their profits hard. In Berlin, the fines for breaking these rules are rising, adding more financial risk for hosts. This has led to a drop in Airbnb listings as many hosts find it tough to comply with the new rules.
The government is cracking down to tackle the impact of short-term rentals on the housing market. They're even asking platforms like Airbnb to share user data to prevent misuse and ensure tax compliance. This increased scrutiny makes short-term rental investments less appealing to potential investors.
Some landlords are switching to long-term rentals, especially after recent court rulings in Berlin that could free up thousands of holiday apartments for the rental market. Data shows that occupancy rates for short-term rentals are dropping, and they might fall further as regulations tighten.
Sources: Euronews, IAmExpat, DW
11) Eco-friendly property values will rise due to government incentives for green building practices
Government incentives for green building practices are set to significantly boost the value of eco-friendly properties.
In Germany, the government is putting its money where its mouth is by allocating a hefty €4.76 billion for energy-efficient retrofits and €1 billion for new constructions in 2023. This isn't just a one-time deal; by 2025, the funding is expected to grow to a whopping €14.4 billion for retrofitting. This financial backing is a big nudge for property owners to invest in eco-friendly upgrades, which in turn, increases the overall value of these properties.
People are catching on to the benefits of sustainable living. Surveys show that homes with an A+ energy label are much more valuable than those without. This isn't just a small difference; properties with an energy label B are worth 28% less than those with an A+ label. Clearly, there's a growing market demand for homes with eco-friendly features.
On top of that, the government is sweetening the deal with tax incentives and rebates. The KfW funding scheme, for instance, offers substantial subsidies and low-interest loans for energy-efficient construction and renovation. These financial perks make it more appealing for homeowners and developers to go green, boosting the market value of eco-friendly properties.
Media coverage is also playing a role. As more people become aware of the benefits of green buildings and the urgency of climate change, the demand for sustainable real estate is on the rise. This increased awareness is pushing more buyers to consider eco-friendly options, further driving up the value of these properties.
Sources: Think ING, TechSci Research, Styx City
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12) Rents in Germany's big cities will keep rising because housing supply can't meet demand
Rents in Germany's major cities are climbing due to a mix of ongoing factors.
In 2023 and 2024, urban populations kept growing, fueled by both natural growth and migration, which in turn boosted the demand for housing. This was especially noticeable in the largest city, where the population hit over 3.5 million. More people are moving to cities, drawn by job opportunities and vibrant city life, which means more competition for apartments.
Another reason for rising rents is the increase in single-person households. More folks are opting to live solo, so even if the population doesn't skyrocket, the need for individual housing units still goes up. This shift is putting extra pressure on the housing market, as more people are looking for their own space.
Adding to the challenge, there's not much land available for new construction. Strict building rules and slow approval processes make it tough to quickly boost the housing supply. This is especially true in cities like Berlin and Hamburg, where vacancy rates are low and finding a rental is getting harder.
In these cities, the housing crunch is real. With limited options and high demand, rents are expected to keep rising. The situation is tough for renters, as they face fierce competition and rising costs.
Sources: DZHYP Residential Market Report, Trading Economics, DW.com, IP Global
In this video, Berlin's rent trends are discussed, showcasing how supply-demand imbalance drives rental prices upwards.
13) Germany’s property tax changes will boost investment in energy-efficient homes
Germany is making it easier to invest in energy-efficient homes with new property tax reforms.
Starting in 2023, the government introduced a 6% tax credit on investment costs for new constructions, valid until September 2029. This makes building energy-efficient homes more affordable for investors. Additionally, there's a climate protection investment premium offering a 15% incentive on eligible expenses, capped at €30 million per entrepreneur. This premium significantly reduces the financial burden, making energy-efficient projects more appealing.
From 2025, investors can benefit from special depreciation allowances for improvements like thermal insulation and solar systems. These allowances can lower the long-term costs of maintaining energy-efficient homes. The market trends in 2023 showed that properties with higher energy efficiency ratings, such as classes A and B, saw an increase in average asking prices. In contrast, less efficient properties experienced a price drop, indicating a growing consumer preference for energy-efficient homes.
The German government's support for climate-friendly construction, along with increased financing options, is facilitating a shift towards energy-efficient housing. This shift is not just about saving money; it's also about meeting the growing demand for sustainable living. The reforms are designed to make energy-efficient homes a more attractive investment, aligning with consumer trends and environmental goals.
Investors looking to capitalize on these trends should consider the long-term benefits of energy-efficient properties. With the government's backing, these homes are likely to retain their value and appeal to a broader market. The combination of tax credits, premiums, and depreciation allowances makes now an opportune time to invest in energy-efficient housing in Germany.
Sources: Clean Energy Wire, Refire Online, Focus Gruppe
14) Demand for smaller apartments will grow as more people live alone
Single-person households in Germany are on the rise, boosting the demand for smaller apartments.
In December 2023, 20.30% of Germans lived alone, a noticeable increase from the previous year. This shift is especially evident in cities where more people are opting for solo living.
Urbanization plays a big role here. Cities like Berlin are seeing a boom in micro-apartments, which are cleverly designed to make the most of every inch. These compact homes are perfect for modern city dwellers who value efficiency.
There's also a cultural shift at play. People are now prioritizing flexibility and mobility, making smaller living spaces more attractive. With many delaying marriage and starting families later, the demand for these apartments is only growing.
Construction is keeping pace with this trend, as more micro-apartments and studio flats are being built to meet the needs of this changing demographic.
Sources: Trading Economics, Home World Design, DZ Hyp Residential Market Report, Hypements Berlin
We created this infographic to give you a simple idea of how much it costs to buy property in different parts of Germany. As you can see, it breaks down price ranges and property types for popular cities in the country. We hope this makes it easier to explore your options and understand the market.
15) Housing demand in Germany will rise in major cities as population growth focuses there
Germany's population is increasingly flocking to its major cities, boosting housing demand significantly.
In 2023, more than 65 million people chose urban living, a jump from the previous year, showing a clear preference for city life. Cities like Berlin and Munich are at the forefront of this trend. Berlin's population hit 3,577,000 in 2024, while Munich's climbed to 1,585,000, highlighting their strong urban appeal.
Rural areas, on the other hand, are seeing a population dip, which means urban centers are becoming even more crowded. This shift is driven by internal migration and changing demographics, with more people moving to cities for opportunities and lifestyle.
The number of households, especially single-person ones, is growing faster than the overall population, pushing property prices up in these bustling cities. Berlin and Munich are prime examples, where the demand for housing is outpacing supply.
For potential buyers, this means navigating a competitive market where prices are on the rise. The urban housing scene is dynamic, with a strong pull for those seeking the vibrancy and opportunities of city life.
Sources: CEIC Data, Macrotrends, DZ HYP Residential Market Report
16) Demand for eco-friendly homes in Germany will grow as more consumers focus on sustainability
German consumers are increasingly aware of their environmental impact, leading to a shift in behavior.
Back in 2023 and 2024, people in Germany started cutting back on consumption, focusing more on sustainability. This trend has only grown stronger, as many believe that consuming less can help save the planet.
The push for eco-friendly homes is also evident in the booming sales of green building materials. The market for these materials in Germany is expected to grow significantly, adding more than USD 11 billion from 2024 to 2029. This surge is driven by strict environmental regulations and a growing consumer demand for sustainable options.
Surveys consistently show that Germans prefer sustainable housing. They are actively looking for environmentally friendly and energy-efficient buildings, making sustainable construction a market-driven necessity. Government incentives for green building practices further support this shift, encouraging architects, builders, and developers to use green materials.
In Germany, the demand for eco-friendly housing is not just a trend; it's becoming a standard. With the government backing green initiatives and consumers demanding more sustainable options, the housing market is evolving rapidly. Builders and developers are now incorporating green materials into their projects to meet this growing demand.
Sources: Mintel, Bona Fide Research
17) Interest in homes with office spaces will grow as remote work becomes more common
The shift to remote work has transformed how we think about our homes.
In Germany, about 25% of employees now work from home regularly, and this trend is reshaping the real estate market. People are increasingly looking for homes with dedicated office spaces to boost their productivity and comfort. This change is especially noticeable in the information economy, where 80% of firms offer remote work options.
Even in sectors like manufacturing, 45% of companies provide remote work flexibility. As a result, real estate listings are now emphasizing home office features more than ever, catering to the evolving needs of buyers.
The demand for home office furniture is also on the rise, with more people buying ergonomic pieces to create comfortable work environments. This trend shows that individuals are serious about setting up efficient workspaces at home, which in turn fuels the desire for properties with dedicated office areas.
For those considering a move to the countryside, this means that properties with extra rooms or adaptable spaces are becoming more attractive. Buyers are keen on finding homes that can easily accommodate a home office, making such features a valuable selling point.
As remote work continues to be a significant part of our lives, the real estate market is adapting to meet these new demands, offering more options for those seeking a balanced work-life environment at home.
Sources: ifo Institute, ZEW, DewertOkin
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18) Properties with green spaces in Germany will become more appealing as urban gardening gains popularity
In Germany, urban gardening is becoming increasingly popular, making homes with gardens more desirable.
According to Immobilienscout24, there's been a noticeable rise in real estate listings featuring gardens, showing that people are keen on properties with green spaces. This trend is not just about aesthetics; it's about lifestyle changes where people want to connect with nature even in urban settings.
Retailers like Obi and Toom have reported that sales of gardening tools and supplies are climbing, indicating that more city dwellers are taking up gardening. This surge in interest is particularly strong among younger generations who are looking for homes with gardens, as highlighted by a 2024 GfK survey.
Media outlets such as Spiegel Online and Bild have been buzzing about the perks of urban gardening, like boosting mental health and fostering community ties. This media attention is making more people aware of the benefits, thus increasing the demand for homes with green spaces.
The German government is also getting in on the action with initiatives like the "Urban Agriculture" program, which supports urban gardening and green spaces. These efforts are making properties with gardens even more attractive to potential buyers.
With all these factors combined, it's clear that the appeal of properties with green spaces is on the rise in Germany, driven by a mix of lifestyle preferences, media influence, and government support.
Sources: Immobilienscout24, Obi, GfK, Spiegel Online, Bundesministerium für Ernährung und Landwirtschaft
19) Germany’s luxury real estate market will slow down as buyers become more cautious about prices
The luxury real estate market in Germany is expected to slow down as buyers become more price-sensitive.
One major reason is the rising interest rates, which have made securing mortgages tougher. Back in 2024, a steep hike in these rates led to a collapse in residential property investment. Although the uncertainty eased by mid-2024, the impact lingers.
Increased property taxes and regulations are also playing a role. Developers are now focusing on energy-efficient buildings and renewable energy to meet both regulatory demands and consumer preferences. This shift is pushing up costs, potentially affecting the affordability and appeal of luxury properties.
Economic uncertainty is another factor. Even though Germany's luxury real estate market showed resilience in 2024, there was a clear trend of cautious spending among high-net-worth individuals. This trend is likely to persist as buyers remain wary, especially with inflation dropping but interest rates still high.
Buyers are becoming more selective, weighing the benefits of luxury properties against their costs. The focus on sustainability and energy efficiency is crucial, but it also means higher initial investments for developers and buyers alike.
As the market adjusts, potential buyers should keep an eye on these evolving trends. Understanding the balance between cost and value in luxury real estate will be key in navigating this changing landscape.
Sources: DZ HYP Report, Domerno Report
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.