Property purchasers surge, yet mortgage rates escalate
The German real estate market is gearing up for a significant resurgence in the coming years, with a projected increase in the purchase of apartments, single-family homes, and building land. According to the Gewos Institute for Urban, Regional, and Housing Research, the number of residential property purchases is anticipated to rise by more than 14% this year, reaching approximately 656,000.
Buyers' confidence in obtaining a mortgage is growing, as some people turn to homeownership due to high rents. However, higher construction mortgage rates are a concern for buyers, with experts predicting that the four percent mark could be reached soon. FMH founder Max Herbst foresees mortgage rates reaching 4% by the end of the year.
The increase in mortgage rates depends on investor trust in Germany's economic turnaround, faith in the Federal Republic as a borrower, or demand for higher risk premiums. It's worth noting that mortgage rates are not tied to the ECB's key interest rates but to the yield on ten-year German government bonds.
Ten-year mortgage rates have recently been around 3.7% annually, an increase from 3.3% a year ago. Even small interest rate increases can be costly for buyers who finance large sums through mortgages. However, potential buyers may benefit from the current price level, as the price for existing apartments is 6% below the record from the last real estate boom, and single-family homes are 7% below the record.
In terms of new construction, the number of residential units approved for new construction and renovation from January to July 2025 is 131,800, a 6.6% increase compared to the first seven months of the previous year. Of these, 17,800 are to be built in new buildings, representing a 33.2% increase compared to July 2024. More new living space is being created in single-family homes and multi-family homes, while the number of approvals for two-family homes decreased.
In July 2025, 22,100 residential units were approved for new construction and renovation in Germany, marking a 30% increase compared to the previous year. This indicates a robust growth in the construction sector, which could potentially lead to more housing options for buyers.
Gewos expert Wunsch suggests that potential buyers may have more choice due to slightly lower prices. The Gewos Institute for Urban, Regional, and Housing Research also anticipates a 14% increase in residential property purchases this year, reaching around 656,000. This rise is expected to continue, with the turnover of single-family homes, condominiums, multi-family homes, and residential building land projected to increase by 18% to around 221 billion euros.
Despite the projected increase in mortgage rates, the German real estate market is expected to remain active, offering opportunities for both buyers and sellers. It's a promising outlook for the German real estate market, with a significant increase in purchases predicted by 2025.
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