Soaring costs for rent and homeownership - Housing costs and property values escalate
The second quarter of 2025 has seen a continued rise in residential real estate prices across Germany's major cities, including Berlin and Düsseldorf. According to the Association of German Pfandbrief Banks (vdp), prices increased by about 1.1% quarter-on-quarter (QoQ) and 4.15% year-on-year (YoY)[1][4].
The dynamics of residential real estate prices have been influenced by several key factors:
- Construction slowdown: Since late 2022, new housing projects have declined sharply by about 85%, and total building areas fell by 5% since early 2025. This has limited the supply of apartments and houses, putting upward pressure on prices[1].
- Economic conditions: Despite a general economic slowdown in early 2025, influenced by external uncertainties such as U.S. trade policies, Germany’s GDP growth projections have improved slightly due to stronger private consumption, fiscal stimulus, and low interest rates. These factors support real estate demand and investment[2].
- Labor market stability and demographic demand: A stable labor market and continued urbanization trends toward major cities like Berlin and Düsseldorf maintain housing demand. Challenges such as skilled labor shortages also affect construction supply[2].
- Shift in investment focus: Deutsche Pfandbriefbank (PBB) and similar institutions are reallocating capital towards European residential and logistics real estate, underscoring confidence in Germany’s urban residential markets despite overall investment volatility[3].
Pfandbrief banks, such as DZ HYP from Hamburg and Münster, collect money from investors to finance a loan. Investors receive additional security in addition to interest when investing in Pfandbriefe, intended to protect them if a bank becomes insolvent[5]. These special type of bonds have been in existence in Germany for many centuries[6]. Pfandbrief banks are specialized in real estate financing and need a permit from the financial supervisory authority Bafin[7].
The vdp announced the price increase in Berlin, where prices increased by 1.7% compared to the previous quarter[4]. Among Germany's seven most populous cities, prices increased the most in Düsseldorf (2%), followed by Frankfurt am Main (1.7%)[4]. The development was weakest in Stuttgart, where prices increased by 0.8%, which is below average[4].
It is important to note that there is currently no data from the Federal Statistical Office for the second quarter. However, the trend in Germany's major cities, as detailed by the Association of German Pfandbrief Banks and affiliated experts, suggests that the recovery phase on the real estate market continues[4].
[1] https://www.vdp.de/presse/pressemitteilungen/preise-fuer-wohnungen-und-haeuser-steigen-in-deutschland-um-11-prozent-im-2.quartal-2025-verglichen-mit-dem-1.quartal [2] https://www.vdp.de/presse/pressemitteilungen/deutschland-wirtschaft-wachstum-2025-prognose-der-bundesbank [3] https://www.pbbde.com/en/content/deutsche-pbb-strengthens-its-position-as-a-leading-european-real-estate-financier [4] https://www.destatis.de/DE/PresseService/Presse/Pressemitteilungen/2025/07/Pressemitteilung_15826351.html [5] https://www.vdp.de/themen/pfandbriefe/was-ist-ein-pfandbrief [6] https://www.vdp.de/themen/pfandbriefe/geschichte-des-pfandbriefes [7] https://www.vdp.de/themen/pfandbriefe/welche-aufsichtsbehörden-sind-fuer-die-pfandbriefe-zuständig
- To mitigate the continuous surge in residential real estate prices and address the chronic housing shortage, extra emphasis should be placed on vocational training programs that foster skilled laborers in construction and real estate industries.
- A comprehensive community policy could be developed to combat the rise in housing prices by addressing not only economic factors but also focusing on the provision of affordable housing and implementing measures to increase the supply of vocational training opportunities in the construction sector.
