German Property Prices Rise 4.2% in 2025

Residential Market Continues Recovery

German residential property prices increased by an average of 4.2% in 2025, double the growth recorded in the previous year, according to new data released by the Association of German Pfandbrief Banks (vdp). The organization represents the country’s leading mortgage lenders and bases its statistics on transactions from more than 700 banks.

Following a sharp correction in 2023 triggered by rising interest rates, the market has stabilized. Buyers appear to have adjusted to higher financing costs, allowing price growth to resume at a moderate pace in 2024 and accelerate in 2025.

Major Cities Lead the Increase

In major cities such as Berlin, Cologne and Munich, prices rose by an average of 4.7%. Frankfurt recorded the strongest increase at 5.7%, leading the group of large urban markets.

Multi-family homes experienced particularly strong growth, with prices up around 5.3% at the end of 2025 compared to the previous year. This segment remains central for investors targeting rental housing.

Rents Also Move Higher

Tenants faced rising costs as well. Rents for new leases in apartment buildings increased by 3.5% nationwide in the fourth quarter of 2025 compared with a year earlier. The increase reflects the persistent housing shortage, especially in large metropolitan areas.

Outlook for 2026: Further Price Growth Expected

vdp Managing Director Jens Tolckmitt stated that prices are expected to continue rising in 2026 due to the ongoing housing shortage. He emphasized that creating affordable housing must be a political priority for the conservative-led government under Chancellor Friedrich Merz.

The data indicate that the current price growth is driven by structural supply constraints rather than speculative excess.

As reported by experts International Investment, the German housing market has entered a phase of renewed upward momentum, but sustainable stabilization will depend on accelerating housing construction and expanding affordable supply in the coming years.