Residential sector drives German property price growth

German property prices continue to rise, with the property price index of the Association of German Pfandbrief Banks (vdp) increasing by 3.6% year-on-year in the third quarter, reaching 183.7 points. 

Jens Tolckmitt

This marks a 0.7% increase from the previous quarter. 
The vdp index, which tracks residential, office, and retail property prices based on actual transaction data, shows that residential property prices contributed most significantly to this growth, advancing by 3.8% annually (0.8% quarterly). 
Commercial property prices also saw an increase of 2.8% year-on-year and 0.5% quarter-on-quarter.
vdp chief executive Jens Tolckmitt stated: “Property prices have been on an upward trajectory since early 2024. The recovery phase on the property market is consolidating further – driven primarily by the growth in residential property prices. The market players have adapted themselves to the new framework conditions.” 
Residential property prices continued their year-long upward trend, rising 3.8% in the third quarter of 2025. Multi-family homes saw the strongest annual growth at 5.2%, outpacing owner-occupied homes (single-family houses and condominiums) which increased by 2.4%. Quarterly growth also favoured multi-family houses (0.9%) over owner-occupied homes (0.6%).
The tight housing market is also evident in rising rents for new multi-family house contracts, up 3.7% year-on-year. However, returns on multi-family houses decreased by 1.4% as prices rose faster than rents.
According to Tolckmitt, the housing shortage in metropolitan areas is expected to persist for several years due to the time required for construction. He emphasised the need to address high construction costs. While the government's "Bau-Turbo" initiative to accelerate housing construction is positive, its effectiveness relies on pragmatic local authority implementation. Tolckmitt also suggested additional measures, including 80% state guarantees for property loans for large-scale construction and a reduction in property transfer tax for owner-occupiers, which is a state-level decision.
In Germany's seven largest cities, residential property prices saw an even more significant increase in the third quarter than the national average, growing by 4.6% year-on-year. Munich led this surge with a 5.3% increase, while Stuttgart experienced the lowest growth at 2.4%. This strong demand in urban centres also drove up new contract rents, which rose by an average of 3.8% across these cities, with Düsseldorf seeing the highest jump at 5.1% and Berlin the lowest at 3.3%. Consequently, returns on these properties, as measured by the vdp cap rate index, declined by an average of 1.1%, though Stuttgart notably bucked this trend with a positive change of 0.7%.
In the commercial property sector, office prices rose more significantly than retail prices, contributing more to the overall 2.8% year-on-year increase. Office property prices climbed 3.0% annually and 0.6% quarterly, slightly outpacing retail property prices, which increased by 2.2% annually and 0.5% quarterly. New office rents advanced by 3.2% year-on-year, while retail rents grew by 1.9%. Consequently, annual returns for offices saw a slight increase of 0.2%, whereas returns for retail premises experienced a minor decrease of 0.2%.
Tolckmitt added: “Transaction activity on the commercial property market remains focused on the top segment, that is, on energy-efficient, flexible properties in top locations. The potential effects on the commercial property market of the ongoing uncertainty factors, such as future economic developments, as well as trade disputes and geopolitical conflicts, remain to be seen.”