Composite by REFIRE
This issue of REFIRE contains more evidence of Germany's property market dysfunction than we have published in recent years: housing completions heading for 215,000, barely half the government’s nominal target; a housing deficit at a record 1.4 million units; and a reform agenda the industry describes, with admirable restraint, as well-intentioned but insufficient.
Reading it all in one sitting, you could be forgiven for concluding that Germany's property market is in serious trouble. And in many respects, it is.
But running as a quiet counter-current through this same issue is a different story entirely, one that we find at least as significant as the litany of structural problems, and considerably more instructive. While Germany's domestic debate remains largely consumed by what doesn't work, international capital is quietly reaching a different verdict. And it is voting with its chequebook.
The most striking piece of evidence arrived on our desk this week, almost too timely to be coincidental. Cushman & Wakefield's Living Investor Survey 2026 found that Germany has moved into first place among the most popular residential investment destinations in Europe. Not second. Not third. First. Two-thirds of respondents already allocate 20% or more of their portfolio to European residential property, and 96% expect that proportion to rise further over the next five years. The UK and Germany alone accounted for two-thirds of the entire European residential investment volume of around €59 billion in 2025. That is not the profile of a market being avoided.
The survey reinforces what several voices in this issue have been saying from direct experience. At the Real Asset Finance & Debt Summit in Berlin in mid-April, Carsten Demmler of HIH Invest noted that half of all property transactions in Germany in Q1 2026 were funded by capital from abroad. Canadian investors are actively looking to Europe. Enquiries from the Middle East have increased sharply in the past six weeks. "The foreign investor has a far more positive view of Germany and Europe than we do ourselves," Demmler said. "They see legal certainty. They see reasonable valuations."
That observation sits alongside something Jürgen Michael Schick argues in his contribution to this issue. International investors, he writes, are not naive about regulation. What they avoid is not regulation but arbitrariness — markets where the rules change overnight, where property rights are uncertain, where the legal framework is opaque. Germany, for all its regulatory density, offers something becoming genuinely scarce: a system that is known, enforceable and stable. Anyone assessing Stockholm, where the average wait for a state-allocated rental apartment now stands at nearly nine years, or Paris, or New York, does not see Germany as a uniquely overregulated outlier. They see a market with clear rules and non-negotiable housing demand.
The CLS Holdings transaction reported in this issue makes the same point in the language of deals. The €60 million sale of The Brix in Essen, bought at 28% vacancy, repositioned through active management, fully let on a 30-year lease and sold at a significant profit, is precisely the kind of transaction that sceptics of the German secondary market said could not be done. CLS have just done it.
These are not isolated data points. Ontario Teachers' Pension Plan has entered the German residential market. Coldwell Banker entered Germany this month via a Hamburg-based master franchise, targeting premium residential in the four major cities. As their German CEO Florian Freytag-Gross observed, real estate decisions are becoming "increasingly international" while the domestic brokerage market remains fragmented and locally branded. They are not entering at the top of the cycle. They are entering at the bottom of confidence, which tends to be when capital becomes most active.
None of this means the domestic critique is wrong. The housing construction sector is genuinely broken at the policy level. The gap between political ambition and operational delivery, in everything from the BauGB amendment to the Building Type E legislation to the Deutschlandfonds housing module, is real and consequential. We have spent considerable space in this issue documenting precisely those failures.
But there is a risk in the relentlessly inward-looking quality of the German property debate worth naming directly. The qualities that international investors value most about this market — legal predictability, structural undersupply, non-negotiable housing demand, a functioning rule of law — are not immutable. They are a function of policy choices. Every time a government floats expropriation, tightens rent controls without addressing supply, or allows the planning system to become still more uncertain, it erodes a little more of the foundation on which that external confidence rests.
Germany does not need to be told it has problems. It needs to be reminded, occasionally, what it has that others do not.
The question is whether the domestic policy debate will catch up with international capital's assessment of Germany's fundamentals — or continue to erode the very qualities that make the market investable. We do not think we are close to that point, yet. But the direction matters. And right now, domestic policy and international capital are not pointing the same way.