Germany Residential Market Q3 2026

Residential Investment Market

 

Transaction Volume

 

By the end of Q3 2026, Germany’s residential investment market had reached approximately €5.9bn across 49,500 residential units traded, equivalent to about 70% of the volume and 90% of the units recorded for full-year 2025.

After remaining stable since early 2024, the prime yield in the top 7 markets increased by 20 bps in Q3 to approximately 3.6%. The yield on 10-year German government bonds rose more sharply to above 3.6%, possibly due to the federal government’s higher financing requirements and increased bond supply. The yield spread narrowed from 50 to −4 bps, eliminating the yield premium for residential properties in the top 7 markets.

 

Trends

 

From Q1 2025 through Q3 2026, asset and fund managers led the buyer side ahead of real estate companies, possibly supported by investor capital and the rental and value appreciation potential of existing properties. The public sector, with approximately €1.8bn, acted almost exclusively as a buyer. By contrast, listed real estate companies and REITs recorded net sales of approximately €1.2bn, as in previous years, amid tighter financing requirements.

 

Outlook

 

The latest rise in interest rates is likely to make the year-end push more challenging. To meet the full-year forecast of €8–9bn, more than €2bn of transactions would need to close in Q4, requiring stronger momentum than the average recorded in the first nine months.

 

Housing Supply and Demand

 

Housing Supply

Building permits are recovering year over year, including for multifamily development, but remain well below 2021/2022 levels, which are still clearly out of reach. So far, the recovery is therefore only occurring from a low base. In the top 20 markets, rental and for-sale supply are moving in opposite directions: advertised rental supply recently declined again and is well below its level at the beginning of 2020. By contrast, the growing for-sale supply is clearly above that level. The shortage therefore primarily affects the rental market, while buyers have more choice.

Time on Market (ToM)

 

The time on market for condominiums is declining in most top 20 markets, particularly in Dresden, Cologne and Duisburg. Contributing factors could include semiconductor investment in Dresden, strong demand combined with lower for-sale supply in Cologne, and the low price level in Duisburg. In Mannheim, by contrast, uncertainty related to the automotive industry’s structural transformation could delay purchase decisions. Overall, shorter marketing periods predominate, with significant regional differences.

 

 

Outlook

 

The decline in rental supply suggests that near-term relief is unlikely. The recovery in building permits also does not indicate a significant expansion in supply. In the owner-occupied market, growing supply is generally accompanied by shorter marketing periods. However, regional differences argue against a uniform market recovery.

 

 

Condominium Rents and Purchase Prices

 

Rental Market

Asking rents in the top 20 cities continue to rise, but at a slower pace. In Q3 2026, the rental index was 3.6% higher YoY and 0.8% higher QoQ. The operating cost index remained stable QoQ across Germany, while increasing by 1.0% in the top 7 markets. Annual increases were 2.0% and 2.4%, respectively. The high housing cost burden could limit the scope for further rent increases and may help explain the slowing growth.

Owner-Occupied Housing Market

The purchase price index for the top 20 cities increased by 2.0% YoY in Q3 2026, but by only 0.1% QoQ. Essen (+5.8%), Bochum (+5.3%) and Bonn (+4.8%) recorded the strongest annual increases. Leipzig (−0.4%) and Stuttgart (−0.1%) posted slight declines.

Asking prices range from €1,962/sq m in Duisburg to €9,085/sq m in Munich. Higher mortgage rates could restrict buyers’ financing capacity and slow the recovery in purchase prices.

 

 

Outlook

 

Further rent increases at a slower pace appear likely. The recovery in purchase prices remains subdued and varies by region. Momentum is significantly weaker than during the growth phase approximately five years ago. 

 

 

Note: The stated rental and purchase prices are based on apartment listings and do not represent actual existing rents and prices.