FRANKFURT (dpa-AFX) – High demand, limited supply: Anyone looking to buy an apartment or house in Germany will struggle to find a bargain – and relief is not in sight. Over the past year, residential property prices have risen by an average of 4.2 percent, according to new figures from the Association of German Pfandbrief Banks (VDP). That is twice as much as in the previous year. Due to the ongoing shortage of housing, prices are expected to continue rising this year as well, said VDP Chief Executive Jens Tolckmitt.
“One of the political priorities in 2026 must be the creation of affordable housing,” he demanded. The federal government has set an effective impulse with the “Construction Turbo” initiative. In his view, government guarantees for new housing construction could also help to create additional living space.
The price increase was particularly strong for multi-family houses, which were around 5.3 percent more expensive at the end of 2025 compared to a year earlier. Owner-occupied properties, including single-family homes and condominiums, rose by 3.0 percent, according to the association. The VDP represents the most important real estate financiers in Germany, including major savings banks, state banks, and private banks such as Deutsche Bank and Commerzbank.
Metropolitan Areas Especially Affected
Once again, real estate prices are rising most sharply in the metropolitan areas: In Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, and Stuttgart, residential property prices increased by 4.7 percent compared to the end of 2024. Prices rose the least in Stuttgart, at 2.2 percent, and the most in Frankfurt, at 5.7 percent. The VDP has been regularly publishing real estate data since 2010. The figures are based on actual transactions from over 700 banks and are considered reliable.
The data shows that the crisis in the real estate market is over. After years of booming prices, apartments and houses became cheaper, with prices dropping significantly in 2023 due to rising interest rates. Recently, however, it has become clear that buyers and home builders have become accustomed to higher financing costs.
Institute Predicts Significant Rent Increases
As housing construction in Germany has stalled for years, pressure on rents remains high: At the end of the fourth quarter, average rents across the country were 3.5 percent higher than a year earlier, according to the VDP.
The consulting institute Empirica expects rents to continue rising. To cover costs, new-build rents in large western German cities would need to be around 20 euros per square meter. Existing rents, which averaged 10.60 euros per square meter nationwide, are also expected to climb in 2026, Empirica estimates – by three to four percent.
“Given new-build rents of 20 euros, asking rents for existing apartments in large western German cities will rise to 15 to 16 euros per square meter, and in medium-sized cities from 13 to 14 euros,” said Empirica board member Harald Simons. While these levels have largely been reached in the metropolitan areas, many medium-sized cities are still facing noticeable increases.
