Häuser und Wohnungen: Immobilienpreise steigen - aber Rückgänge in Metropolen

German property prices are rising, but the pace of increase is slowing down. In the second quarter, houses and apartments cost an average of 0.6 percent more than a year prior, according to the Federal Statistical Office. Despite this, the value for the first quarter was revised downward from 1.4 percent to 1.2 percent. Comparing the April-June period to the first quarter, property ownership increased by 0.3 percent.

The recent price increases are mainly due to high construction costs and higher interest rates resulting from the Iran war, which makes mortgage loans more expensive. Experts do not expect any relief in sight. Prices in major cities are slightly declining In the seven largest German cities - Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, and Düsseldorf - property prices for ownership apartments dropped from April to June, both compared to the previous year (-0.4 percent) and the previous quarter (-0.5 percent).

While this may provide a weak consolation for buyers, the price level in urban areas remains high. Adjusted for consumer price inflation, property prices in Frankfurt and Munich have become considerably cheaper after the long low-interest boom, according to Maximilian Kunkel, chief investment strategist of Swiss bank UBS in Germany: "Inflation-adjusted prices are up to 25 percent below the peaks of 2021 and 2022."

Significant regional differences Even in densely populated rural areas, buyers had to pay less for ownership apartments: on average, property prices fell year-on-year (-1.8 percent) and compared to the first quarter (-1.3 percent). In non-metropolitan large cities, however, prices for apartments rose by 2.0 percent compared to the previous year and by 0.5 percent compared to the previous quarter.

Germany is estimated to be missing more than a million apartments. Especially in urban areas, affordable housing is scarce, which keeps prices high and leads to rising rents. Fewer new apartments were built in Germany in 2025 than in any year since 2012: only 206,600 or 18 percent fewer than the previous year. With the "construction turbo", the black-red federal government aims to increase the construction of affordable housing.

After promising 400,000 new apartments per year in the previous social-democratic government, this target was never met. To tackle the housing shortage, the current coalition government wants to speed up construction with faster approvals and fewer regulations, as well as revive subsidy programs for energy-efficient building. While building permits increased in recent months, the construction costs have risen again due to the Iran war, and the 10-year construction loan rates have jumped above four percent due to inflation concerns.

"We are approaching the possible 4.5 percent construction loan rates," said Max Herbst, founder of FMH Financial Advisory. Economists fear that the housing construction boom may stall before it even begins. "Interest rates are edging towards their possible peak of 4.5 percent," noted Max Herbst. The Immobilienverband, representing real estate agents, property managers, and experts, expects no boom in the housing market.

In a report for purchasing and rental prices in about 500 cities and municipalities, the IVD stated that high financing barriers make homeownership difficult, while a scarce rental market further intensifies the pressure. Particularly among the 25- to 45-year-old age group, the homeownership rate is low, and most people live in rented accommodations.

Even for younger households with disposable income, failure to purchase a home can have long-term consequences for wealth accumulation and private retirement savings.