German housing prices set to rise as market remains under pressure
The price of flats and houses in Germany continues to increase despite the economic crisis and after a significant fall in prices in recent years, according to real estate specialists and a series of reports.
Meanwhile affordable housing remains in short supply, particularly in urban areas, and pressure on rents remains high.
Tenants and buyers can expect little in the way of short-term relief as construction costs and interest rates have risen and the price of flats and houses is likely to further increase in 2026, said Michael Voigtländer, real estate expert at the German Economic Institute (IW). “I expect a moderate increase of 3% to 4% but not as rapid as in the 2010s,” he said.
The economic crisis, and associated job cuts, is also dampening the property market – but other factors are also driving rising rents and purchase prices.
A growing number of people are living alone, driving up demand for living space regardless of population size, said Carsten Brzeski, chief economist at ING Bank. “The average household size is falling continuously and currently stands at 2.0 people.”
The rate was 2.3 people in 1991 but people are starting families later and the birth rate is falling, trends that are likely to continue.
Urbanization is also contributing to Germany’s housing shortage. While some 1.7 million flats stand vacant nationwide, especially in rural areas, the market in metropolitan areas is highly competitive, said Empirica, a research and consulting firm. Cities attract tens of thousands of young people every year, according to figures from Empirica Regio, partly drawn by job opportunities.
