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Germany has spent decades getting used to a simple assumption: living space always grows. Apartments got larger, comfort increased, and rising prosperity quietly translated into more square metres per household. A new study by the German Institute for Economic Research (DIW) suggests that era has now ended.
For the first time since records began, the average size of apartments in Germany is no longer expanding. The change is subtle, but structural. According to the DIW, average apartment sizes rose from 69 square metres in 1965 to 94 square metres today, while living space per person more than doubled to around 49 square metres. That long expansion phase, the institute argues, is over. Since around 2005, newly built apartments have been getting smaller, and this will gradually pull down the average size of the overall housing stock.
By 2050, the DIW expects the average apartment to be around six square metres smaller than today, at roughly 88 square metres. “For decades, rising incomes and the desire for greater comfort have led to our apartments becoming larger and larger,” says DIW real estate expert Konstantin Kholodilin. “But the growth phase seems to be over. The decline in new-build sizes signals a structural change across the entire housing market.”
An affordability adjustment, not a lifestyle shift
This is not a story about changing tastes. It is a story about constraints. Two forces are doing most of the work. First, Germany’s household structure has changed fundamentally. The share of single-person households has doubled since the 1960s to 41% nationwide, and to around 50% in large cities such as Berlin and Munich. Second, prices have done the rest. Since 2010, rising land, construction and financing costs have made large apartments increasingly unaffordable for households and increasingly unattractive for developers. Smaller units are simply easier to sell, let and finance.
The result is an adjustment rather than a retreat. Large apartments still dominate Germany’s existing housing stock, but new supply is being reshaped to match today’s economic reality. Sebastian Kohl, a co-author of the DIW study, is explicit on this point. Smaller apartments, he argues, are not a step backwards, but a necessary response to demographic change and affordability limits. Well-designed, energy-efficient units will become the standard form of housing, while also helping to curb the building sector’s high energy consumption.
Market data suggests this adjustment is already under way. Residential prices stopped falling in 2025 and began rising again towards year-end, particularly for apartments. According to data from Immowelt, asking prices for apartments rose across most major cities in the fourth quarter, while demand remained concentrated in metropolitan areas. Houses, by contrast, showed a more mixed picture. Higher prices, larger floor areas and heavier modernisation costs are increasingly meeting resistance from buyers.
Demand patterns reinforce the same message. Interest in apartments remains strongest in urban centres, while demand for single-family homes has softened, especially outside cities. Buyers are becoming more selective, and unit size has moved from a secondary consideration to a core pricing factor. Smaller, efficient apartments in good locations are easier to place than larger properties requiring significant upgrades.
What does this mean for investors and developers? In short, the long-standing assumption that “bigger is better” no longer holds. Unit size, layout efficiency and energy performance now matter as much as location. Existing stock that is misaligned with today’s household structures faces growing pressure, while new projects that prioritise smaller, well-planned units stand a better chance of clearing both planning hurdles and market tests.
This is not a boom story. It is a reset. Germany’s housing shortage will not be solved by building ever-larger homes for ever-smaller households. The DIW study makes clear that the market is already adjusting, slowly but decisively, to a new equilibrium. For residential investors, that shift will shape supply, pricing and demand well beyond the next cycle.