Report H2 2024

Residential Report Germany H2 2024

Report Germany H2 2024

Trends and insights of the residential market in Germany

Germany’s population has grown 5% over the past 10 years (2023: 84.7 million). The latest spatial planning forecast (based on the 2022 census) expects population growth to stabilise over the next two decades (2025-2045). Therefore, rent prices are likely to continue their lively growth trajectory against a backdrop of potentially sluggish residential construction activity in the years to com

Find out more about current (rent) prices in Berlin, Munich and Hamburg and the price trend at a district level in our new District Dashboards. Click here for detailed rent and price comparisons:

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CONTENTS AT A GLANCE

Prologue [»]
Residential investment market Germany
Rental housing market Germany
Market data on major German cities
Factsheets on 109 cities

Overview | Prologue| Residential investment market | Rental housing market | Download

PROLOGUE

FAVOURABLE POPULATION GROWTH EXPECTED THROUGH 2045, ESPECIALLY IN METROPOLITAN AREAS

Germany’s population has grown 5% over the past 10 years (2023: 84.7 million). The latest spatial planning forecast (based on the 2022 census) expects population growth to stabilise over the next two decades (2025-2045).
However, the forecast population trend varies considerably from region to region. A slight decline (-1%) in the number of inhabitants is expected for medium-sized cities with up to 100,000 inhabitants. In contrast, slight growth of 2% is expected for large cities with over 250,000 inhabitants and 5% for A-cities.

STRONG GROWTH FORECAST PARTICULARLY FOR BERLIN AND MUNICH THROUGH 2045

The degree of momentum behind growth differs among Germany’s top 7 cities. According to the spatial planning forecast, population is likely to see steep growth particularly in Munich (+8%) and Berlin (+7%). Hamburg (+6%) and Frankfurt (+5%) are also expected to see relatively strong growth.
A comparison of forecast figures and population trend over the past 20 years shows that we should expect somewhat slower growth momentum in the coming two decades. Take the country’s two top locations, for example, which posted the highest population growth between 2003 and 2023 (Munich and Frankfurt) at 21% each. This slight deceleration in growth can be attributed to an ageing society combined with anticipated lower positive net migration going forward compared to the past two decades.
The number of households is set to increase in the wake of the favourable population trend predicted for Germany’s A-cities, which will have a direct impact on demand in the housing market. With new residential construction not expected to be able keep up with more demand in the coming years, this trend is likely to put additional pressure on the residential rental market and cause rent prices to continue to rise.

RECENT SIGNIFICANT INCREASE IN HEADLINE RENTS IN NEW LEASES AS WELL AS IN RENTS UNDER EXISTING LEASES

Pressure from demand has been steadily growing in recent years with supply currently insufficient to effectively address this growing demand. This situation is reflected in the pace at which rent prices are rising across the board.
Berlin’s residential rental market is an excellent example of just how dynamic the current situation is. While asking rents in the city experienced a comparatively moderate increase of +6% between 2019 and 2021, they rose +25% between 2021 and 2024. Rents under existing leases (estimated using the rent index), however, also rose a steep +9% during this time.
We are likely to see higher rents under existing leases and being asked for listed residential units in the already tight

PRONOUNCED EXCESS DEMAND, ESPECIALLY FOR 1 AND 2-ROOM APARTMENTS IN BERLIN

The current imbalance between supply and demand is a significant driving force behind the recent strong growth in rent prices in Berlin.
The demographic shift and growing number of small households, especially single-person households, are triggering demand for 1 and 2-room apartments in the city. Demand for 1-room apartments in Berlin is estimated at just under half a million households with the housing stock only providing around 110,000 rental units. We are seeing considerable excess demand for 2-room units as well. In purely mathematical terms, there are just under 700,000 households potentially looking for a 2-room apartment, compared with stock of just under 390,000 units. In contrast, larger units appear to be experiencing some excess in supply, at least in theory.
This indicates that it is particularly Berlin’s small rental unit segment that is currently experiencing a supply bottleneck. Excess demand in the segment is being exacerbated by increased demand for small units with compact floor plans at a time when construction activity in the city is experiencing a slump. The share of small-scale rental units in new-build developments is often much too low. Germany’s other A-cities are facing a similar trend.

NEW-BUILD ASKING RENTS IN BERLIN SHOW STEEPER UPWARD TREND THAN THOSE IN OTHER A-CITIES

The current imbalance between supply and demand is also fuelling pressure on Berlin’s residential rental market, which is already high. This development can be seen in the above-average growth of rent prices in the city, particularly since 2020. Berlin posted a steep increase of 14% between 2022 and 2023 alone, although the trend did slow somewhat in 2024 at 5%.
Annual rent growth in Germany’s other A-cities has been less dynamic than that in Berlin since 2018. Although median rents in the country’s other A-cities were still higher (€15.05 per sqm) than those in Berlin (€13.80 per sqm) in 2018, Berlin posted higher median rents (€20.75 per sqm) than the other top locations (€19.65 per sqm) in 2024.

Find out more about current (rent) prices in Berlin, Munich and Hamburg and the price trend at a district level in our new District Dashboards. Click here for detailed rent and price comparisons:

District Dashboards

In our new district dashboards, you can find out more about the current (rent) price level for Berlin, Hamburg and Munich and its development at the small-scale level of the districts.

KEY TAKEAWAYS

The German residential investment market continued its recovery over the course of 2024. Larger residential portfolios (30 units or more) generated a transaction volume of €9.3bn this past year, making residential the strongest asset class in 2024 ahead of logistics (€6.9bn), retail (€6.3bn) and office (€5.2bn). Given the return of investor confidence, growing optimism in the financing environment and the further improvement in fundamental data, this favourable trend on the German residential investment market is likely to continue in 2025.
Population growth in Germany has been quite positive over the past 10 years (+5%), generating additional demand on the residential rental market. Supply has been insufficient to effectively address this growing demand, especially in recent years. This has been putting significant pressure on the German residential rental market, which can be seen in the fact that rents have recently risen more strongly than they have in many years.
According to the latest spatial planning forecast, Germany’s population is expected to continue to rise over the next two decades with particularly above-average growth in the country’s A-cities. We can therefore expect demand to remain quite robust in the coming years, particularly in Germany’s major cities.
Rent prices are likely to continue their lively growth trajectory against a backdrop of potentially sluggish residential construction activity in the years to come. Good prospects in terms of fundamentals and cash flow stability are also excellent arguments for investing in German residential real estate.

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