williamperugini/Envato
Old residential buildings in Dusseldorf
Germany's market for Zinshäuser—multi-family residential buildings typically held for long-term rental income—is showing the clearest signs of renewed investor interest since the market correction began in late 2022. Modest but broad-based price gains, rising rents and a rebalancing of buyer and seller expectations are gradually restoring confidence in this cornerstone of the country’s housing stock.
The latest data from the Association of German Pfandbrief Banks (VdP) shows that prices for apartment buildings rose by 2.9% year-on-year in Q4 2024, significantly outpacing gains in the owner-occupier segment. New lease rents in these buildings also climbed by 4.6% nationwide, reflecting the acute supply shortage across much of the country. Yields have ticked up slightly, though the 1.6% year-on-year increase marks the slowest gain since 2022. The VdP's Property Price Index now stands at 178.4, up 1.8% year-on-year.
Major cities led the recovery. In the so-called 'Top 7', price growth in multi-family assets averaged 2.3%, with Cologne and Munich each recording gains of more than 3.5%. New lease rents in these cities rose by an average of 3.9%, with Berlin registering a 4.4% increase.
Hamburg provides a revealing case study. After a steep fall in 2023, transaction volumes rebounded 41% last year, reaching 398 deals—just 7% below the ten-year average. Yet average deal size fell sharply, reflecting a shift away from institutional players. Private investors and family offices dominated activity, particularly in lower- and mid-tier locations. According to Moritz Carl Gäde, CEO of local multi-family specialist broker Zinshausteam & Kenbo, the market has found a new pricing level. "While institutional investors are still waiting on the sidelines, smaller players took advantage of 2023's discounts," he noted. In prime Hamburg locations, prices rose by 6.5% in 2024, while poorer districts also recorded gains of around 5%.
Investors pricing in high costs for ESG improvements
However, caution still prevails. Average per-square-metre prices remain well below 2021 peaks, and gross rent multipliers have compressed dramatically. In Hamburg, average capitalisation multiples fell from over 32 times annual net rent in 2021 to 20.8 in 2024. In top locations, the fall was steeper still, from 46.5 to 25.3. Investors are pricing in the high cost of modernisation and future energy-efficiency requirements, particularly for older stock.
While transaction activity has picked up, volumes remain subdued compared with pre-2022 levels. Many institutional investors continue to review underwriting assumptions and capital allocation frameworks. Still, several asset managers have told REFIRE they are re-entering cautiously, targeting core-plus assets in undersupplied urban submarkets where rental growth appears sustainable.
The market's reset has also reignited debate about the political climate for housing investment. Jens Tolckmitt of the VdP criticised the lack of urgency in national housing policy, pointing to Germany's continued failure to meet its residential construction targets. "It is completely incomprehensible that housing policy is playing only a minor role in the federal election campaign," he said. "The next government must implement targeted, concrete measures to restore investor confidence."
For now, the Zinshaus market is moving again—if slowly. The steep price corrections of 2022 and 2023 have allowed a new equilibrium to emerge. But the path ahead remains narrow. Rising rents and stabilising prices may bring some relief to owners and developers, but buyers remain acutely focused on yield, location and renovation risk. As 2025 unfolds, selective deployment is likely to define the next phase of the recovery.