Germany’s property market began 2025 with continued growth. The property price index from the Association of German Pfandbrief Banks (VDP) rose by 3.3% year-on-year in Q1, reaching 180.5 points. Compared to Q4 2024, prices increased by 1.2%.
Residential properties drove the growth, with prices rising 3.6% year-on-year, mainly due to a 4.8% increase in multi-family house prices. Owner-occupied homes saw a smaller 2.3% rise. Rents for new leases on multi-family houses climbed 4.3%, though returns slightly declined due to strong investor demand.
Commercial property prices also increased, up 2.3% year-on-year. Office property prices rose 2.4%, while retail gained 2.0%. Office and retail rents grew moderately, and annual returns saw modest gains, though quarterly returns dipped for the first time in years.
VDP CEO Jens Tolckmitt welcomed the positive trend but urged caution, citing global economic uncertainty and limited transaction volumes. He emphasized the need for strong housing policy to address Germany’s growing housing shortage, calling for swift government action to support new construction.
Looking ahead, residential demand is expected to remain high, sustaining price and rent growth. Commercial market recovery, however, remains uncertain amid geopolitical and economic challenges.