Property prices pick up further

vdp index records 3.9% increase year on year

The rise in property prices in Germany continued in the second quarter of 2025. The property price index of the Association of German Pfandbrief Banks rose by 3.9% compared with the corresponding quarter one year earlier to reach 182.4 points. Measured against the first quarter of this year, a 1.0% increase was recorded.

The figures used to calculate the vdp index have been collected by vdpResearch every quarter since 2010. They track price developments on the entire German market for residential, office and retail properties and – unlike other price indices – are based on an analysis of actual property transaction data from more than 700 credit institutions.

As in the previous quarters, the price increase in the second quarter was chiefly attributable to residential property prices. These went up by an average of 4.1% year on year and 1.1% quarter on quarter. Although somewhat lower by comparison, growth in commercial property prices, which comprise office and retail property prices, was also significant, at 2.9% year on year and 1.0% quarter on quarter.

Property prices have gone up for the fifth consecutive quarter – and prices for residential properties are still driving the trend.
Jens Tolckmitt

“The recovery phase on the property market is continuing,” vdp Chief Executive Jens Tolckmitt reported. “Property prices have gone up for the fifth consecutive quarter, and prices for residential properties are still driving the trend. Residential property price momentum picked up again recently, clearly as a result of the extremely tense situation on the housing market.”    He added that, at a time when building completions recently dropped significantly, more and more prospective buyers are showing interest in the small number of residential properties on the market. This is pushing prices up further.

Residential properties: jump in prices for multi-family houses

The overall growth in residential property prices of 4.1% year on year was mainly driven by the trend in prices for multi-family houses, which increased by 5.6% compared with the second quarter of 2024. Prices for owner-occupied housing, which is to say single-family houses and condominiums, rose by 2.6% year on year. Comparison with the immediately preceding quarter presented a similar picture. At 1.3%, the price increase for multi-family houses was noticeably higher than for owner-occupied housing (0.8%).

The ever-worsening housing shortage also caused rents under new contracts for multi-family houses to rise further in the second quarter of 2025. However, at 3.5% year on year, the increase was somewhat less dynamic than in the previous quarter (4.3%). Measured by the vdp index for cap rates, returns on rental properties fell by 1.9% year on year as rent increases were relatively modest compared with price growth.

The housing shortage will likely cause residential property prices and rents to rise further in the trend.
Jens Tolckmitt

The new federal government’s initiative to speed up housing construction (“Bau-Turbo”) is an important first step, Tolckmitt pointed out. He added, however, that the creation of new housing will take time and requires other impulses besides. “This means that the housing shortage is going to be with us for at least several years more, and will likely cause residential property prices and rents to rise further in the trend.” That said, just how long the current, very sharp increase in prices and rents will last is difficult to forecast at present, Tolckmitt remarked.

Housing in top 7 markets: Munich and Frankfurt am Main see greatest increases

In the second quarter of this year, residential property prices in Germany’s top 7 cities rose somewhat more strongly than in the country as a whole. In Berlin, Cologne, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart, price growth for residential properties came to an average of 5.5% compared with the corresponding quarter one year earlier. Munich and Frankfurt am Main saw the strongest rates of increase, namely 6.5% and 6.4% respectively. The lowest year-on-year price increase was calculated for Stuttgart (3.0%).

Compared with the immediately preceding quarter, Düsseldorf (2.0%) and Frankfurt am Main (1.7%) recorded the strongest growth rates among the seven metropolitan areas. On average, residential property prices in the top 7 cities rose by 1.5% between the first and second quarters of this year.

The housing shortage in Germany and the attendant rise in rents were especially evident in the metrololitan areas. Rents under new contracts rose by an average of 4.3% in the seven major metropolitan areas compared with the corresponding quarter one year earlier. Düsseldorf and Frankfurt am Main reported rent increases of 5.0% and 4.9% respectively, whereas the smallest increases were recorded in Cologne and Stuttgart at 3.6% and 3.4% respectively. Returns as measured by the vdp cap rate contracted on average by 1.6% in the top 7 cities, and saw changes of between -2.4% (Cologne) and +0.1% (Stuttgart).

Commercial properties: prices and rents rise in lockstep

The rise in commercial property prices to the tune of 2.9% compared with the second quarter of 2024 consisted of price increases both for office properties (3.3%) and for retail premises (2.0%). Compared with the first quarter of 2025, too, prices for offices advanced more strongly (1.1%) than for retail properties (0.6%). The overall price level for commercial properties rose by 1.0% quarter on quarter.

Rents under new contracts for commercial properties followed a similar trajectory to that for prices. Office properties recorded an average rent increase of 3.5% year on year, while retail properties saw lower growth of 2.1%. Returns as measured by the vdp cap rate index rose by 0.3% year on year for offices and 0.2% for retail properties. Quarter on quarter, returns contracted by 0.1% for offices and 0.2% for retail properties.

Developments on the commercial property market have not yet stabilized as much as on the residential property market.
Jens Tolckmitt

 “Commercial property prices, too, have become more stable over the last several quarters and again show signs of an upturn,” Tolckmitt commented.  Nevertheless, he added, developments on the commercial property market have not yet stabilized as much as on the residential property market, as the persistently low number of transactions, for example, demonstrates. So far, the market has been focussing heavily on energy-efficient commercial properties in prime locations. The fact that the economc recovery has not yet got underway as well as the ongoing trade conflicts and the geopolitical crises remain potential sources of stress and uncertainty for the commercial property market, Tolckmitt concluded.