The German Property Federation (IVD) has presented its latest Residential Price Index 2025/26. The nationwide analysis shows that home ownership is becoming more affordable again for many households, rents under new tenancy agreements continue to rise and the property market is regaining momentum after a period of restraint.
“We are seeing a reversal in the trend: for many households, buying a home is becoming more attractive again relative to renting,” says IVD President Dirk Wohltorf. “Stable purchase prices, rising incomes and predictable interest rates are helping to improve financing conditions.”
Ownership is becoming more affordable
While new builds recently recorded slight price increases, existing detached and terraced houses remained largely stable. Particularly for existing properties, it is therefore worth considering a purchase, especially in view of the tight rental housing markets in many areas. The data shows that, for existing properties, interest and principal repayments on a purchase are often on a par with the rent for a comparable property.
Rents under new tenancy agreements continue to rise
Meanwhile, rents under new tenancy agreements have risen nationwide: for existing homes, they climbed by around three to four per cent to 10 to 12 euros per square metre, and for new builds by 3.5 to 4.5 per cent to 12.60 to 14.40 euros. Persistently low levels of new construction, which restrict supply, are responsible.
“The gap between rents under existing and new tenancy agreements is growing ever wider,” stresses Wohltorf. “This is due to a lack of new construction, low caps on rent increases and a frozen pattern of moving home. Tenants remain in flats that often no longer suit their needs, making the shortage even worse.”
A market with renewed momentum
Transaction activity has regained momentum. Properties worth 70 billion euros changed hands in Germany in the second quarter of 2025, an increase of 21 per cent compared with the same quarter of the previous year. However, confidence in the market and the willingness to invest in property for personal use or as an investment stand or fall with pricing that reflects the market. In good locations, properties with realistic asking prices find buyers within an average of three to four months. Overpriced flats and houses, which face considerably greater competition from comparable listings than they did three years ago, are often on the market for more than six months and can be marketed successfully only after one or two price reductions. “Following the broad-based fall in prices in recent years, we are now seeing stable to slightly rising trends, particularly for well-refurbished properties in sought-after locations,” says Wohltorf.
Energy efficiency also continues to attract increasing attention. Refurbished flats recently became noticeably more expensive, while unrefurbished older buildings can often be sold only at substantial discounts. “A property’s energy condition has now become a decisive market filter. Buyers pay more attention to it than ever, not least because banks penalise poor energy performance with surcharges,” the IVD President explains.
The outlook is also brightening for investors: the combination of stable prices and rising rents is making property investment more economical again. The ratio of purchase price to rental income is improving significantly, particularly in cities such as Hamburg, Munich and Stuttgart.
Large cities stagnate – small and medium-sized towns gain ground
While the major cities present a mixed picture and prices there are largely stagnating, small and medium-sized towns are becoming more attractive. Lower entry prices, a high quality of life and stable price trends make them increasingly appealing. Detached houses in medium-sized towns cost an average of around 365,000 euros, about 40 per cent less than in large cities. In small towns, the average is even lower at around 280,000 euros.
“This shows that housing beyond the major cities remains affordable for broad sections of the population,” says Wohltorf.
Conclusion and outlook
Overall, the housing market remains characterised by contrasts: rising rents alongside stable prices; recovering demand for ownership alongside a standstill in new construction; and growing transaction momentum alongside constrained housing policy.
“Rent and price trends send a clear message that policymakers must now translate into the right measures,” Wohltorf explains:
- “We need a funding programme for home purchases so that we can capitalise on the currently improved relationship between debt service and rent.
- We need a funding programme for the energy-efficient refurbishment of existing properties that, unlike ‘Young Buys Old’, takes account of the realities facing young buyers.
- We also need the construction boost for detached and semi-detached houses, in order to increase supply in the segment where the younger generation’s prospects of moving up are most clearly decided, thereby also easing pressure on rental housing markets.”
“The route to a genuine transformation in housing does not lie in new regulations and prohibitions, but in deregulation, strengthening private ownership and mobilising private capital. The IVD is ready to support this dialogue constructively,” Wohltorf concludes.