Purchase prices for residential property in Germany are stabilising across the board at the start of 2026 – a sign that the market is settling down and providing new benchmarks for investors. At the same time, demand for rental properties remains high, keeping pressure on the rental markets. As recently reported by Handelsblatt, Tagesspiegel and Deutschlandfunk, among others, the latest IW Housing Index for the first quarter of 2026 underscores the great resilience of the German residential property market, despite continuing challenging conditions.
In detail, the study by the German Economic Institute (IW) shows that purchase prices rose by 0.1 per cent quarter-on-quarter for both flats and detached and semi-detached houses, indicating effective stagnation. However, on a year-on-year basis, there is still moderate growth, particularly for flats, which saw an increase of 2.5 per cent. This trend suggests that the market is increasingly stabilising following the turbulence of recent years. Buyers and sellers have adjusted to a new price level.
The rental market continues to show significantly stronger growth: rents for new tenancies rose by 3.5 per cent compared with the same quarter last year. This growth is particularly pronounced in the areas surrounding the major cities, with an increase of 4.2 per cent. This trend is also highly relevant for the areas surrounding Berlin. Although Berlin itself has recently recorded a slight decline in rents (-0.8 per cent), excess demand remains high overall. This once again highlights the structural shortage of supply, which is particularly noticeable in growing regions such as the capital region.
There is also a growing regional divergence in purchase prices: whereas some major cities such as Cologne and Frankfurt are recording significant increases, prices in Berlin are rising only moderately, with a year-on-year increase of 0.8 per cent. On a quarter-on-quarter basis, there is even a slight slowdown. This aligns with a market that is currently rebalancing itself and where both location quality and property-specific factors are becoming increasingly important.
The energy efficiency of buildings remains a key influencing factor. As the analysis shows, less energy-efficient properties continue to trade at significant discounts of up to 30 per cent compared with highly efficient properties. Although this effect has weakened somewhat recently, it remains above the level seen prior to the 2022 energy crisis. Particularly against the backdrop of rising energy prices due to geopolitical tensions, this factor is becoming increasingly important for investors and owner-occupiers alike and is likely to remain a key value driver in the long term.
For the capital region, this points to a clear trend: while purchase prices are stabilising and making them easier to predict, pressure on the rental markets remains high – particularly in the areas surrounding Berlin. At the same time, preferences are shifting towards energy-efficient and sustainable properties, opening up new opportunities for project development and portfolio optimisation.
“The latest figures show that the residential property market is in a phase of stabilisation, with new differentiations emerging. In Berlin and its surrounding areas in particular, excess demand remains high, whilst increasingly attractive entry opportunities are emerging for buyers. The key will be to find the right solutions to address rising demands related to energy efficiency and construction costs,” says Jacopo Mingazzini, CEO of The Grounds.
