RossHelen/Envato
Frankfurt is seeing strong demand in central districts
After two years of declines, Germany's residential property prices are showing signs of stabilisation—though not across the board. According to the latest figures from the Association of German Pfandbrief Banks (VdP), residential property values rose by 2.1% in Q4 2024 compared to the same period in 2023, driven largely by multi-family housing, which posted a 2.9% gain. The VdP Index now stands at 178.4 points, reflecting a modest but broad-based recovery that includes all of the country’s top seven cities.
This tentative turnaround is confirmed by the Kiel Institute for the World Economy’s GREIX index, which is based on notarial sales data rather than advertised asking prices. While prices for all residential asset classes declined year-on-year in 2024—dragged down by a sharp fall in Q1—the second half of the year saw stabilisation or slight gains. The steepest drop since the 2022 peak was in multi-family assets, down 21.6% in nominal terms and 27.6% in real terms. Single-family homes fell 12.9%, and condominiums declined 11.4%, or 18.2% in inflation-adjusted terms.
However, the picture is increasingly segmented. Demand for new-builds has returned in strength, with completed apartments in the top seven cities trading at close to peak levels. Transactions for new-builds rose by 40% in 2024, although these still accounted for just 10% of total volume—well below historic norms. By contrast, older stock remains under pressure. Existing flats built before 1950 sold at 2.3% below 2023 levels; those built after 1950 fell 1.8%.
Frankfurt seeing strong demand in central districts
Frankfurt stands out among the top cities. Prices for condominiums rose by 3.9% year-on-year, and agents report strong demand, especially in central districts such as Sachsenhausen, Westend and Nordend. Von Poll Immobilien noted that 2024 brought the company's best-ever sales results in Frankfurt. Managing partner Daniel Ritter commented: "The wait will only cost money. Prices are no longer falling, and interest rates are stable. It won’t get any better than this."
Prices of up to €18,000/m2 have been reported in Westend and Sachsenhausen for premium new builds. In mid-range areas such as Bockenheim or Eschersheim, prices for existing stock range from €6,000 to €7,000/m2, while new builds in good locations are commanding €9,000/m2 or more. According to David Schmitt of Engel & Völkers, marketing periods remain steady at four months. "The market is back," he said, "but it has changed. Buyers are more selective, and banks are taking longer to approve loans."
New lease rents in Frankfurt’s core districts have also increased sharply, particularly in sought-after areas such as Nordend and Westend, where new contracts are now being signed at upwards of €20/m2. Some agents report that well-located one-bedroom units are attracting bidding competition again, a sign of tightening supply.
The stabilisation is being driven by a combination of firm rental growth and gradually improving financing conditions. New lease rents in multi-family buildings rose by 4.6% nationally and 3.9% across the top cities, according to the VdP. Yields on rental properties rose by 1.6% year-on-year, though this was the slowest growth since 2022. Some institutional investors have begun cautiously stepping back into the market, particularly where rents have reset and yields have stabilised above 4.5%. Others remain wary of exposure to older or energy-inefficient stock.
Cologne saw the highest year-on-year price growth among the top seven cities at 3.8%, followed by Frankfurt and Munich. Stuttgart and Düsseldorf lagged with gains of 0.3% and 0.8%, respectively. According to the VdP, yields rose across six of the top seven cities, with only Cologne recording a decline.
Construction bottlenecks still dampening sentiment
Structural pressures remain. Supply constraints are acute: new construction starts remain well below target, and the backlog of delayed or abandoned projects is growing. Investor caution persists, particularly in lower-tier cities and among smaller developers. Dr. Michael Voigtländer of the IW Köln notes that Germany’s fixed-interest mortgage model has helped shield households from distress, with non-performing housing loans averaging just 0.8% over the past five years. Still, he warns of continued macroeconomic uncertainty and suggests that mortgage insurance based on the Dutch model should be considered to improve long-term resilience.
Despite a modest recovery, sentiment remains cautious. Jens Tolckmitt of the VdP welcomed the stabilisation but reiterated that there is no dynamic upward trend. “The development is encouraging, but fragile,” he said. “We are still seeing significant headwinds in construction, financing, and investor confidence.” He was also sharply critical of political inaction. “It is completely incomprehensible that housing policy is playing only a minor role in the federal election campaign,” he said. “Germany needs decisive action to increase residential construction—especially in the large cities—before this crisis turns into long-term damage.”
Tolckmitt also warned that without a stronger economic stimulus, the outlook for 2025 remains subdued. “Germany is facing a decisive year,” he said. “Tangible policy action is needed to strengthen competitiveness, unlock private investment, and avoid a stalled recovery in the housing market.”