Up by 4 %: property prices confirm upward trend in 2025

vdp index records price increases in all four quarters

Property prices in Germany have been on the rise for two years. After 1.8% growth in 2024, prices were up by 4.0% in 2025. This is shown by the property price index of the Association of German Pfandbrief Banks (vdp), which climbed to 185.6 points as at end-2025. Price increases were recorded in all four quarters of 2025, most recently by 1.0% from the third to the fourth quarter.

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.

The rise in the index was again driven more strongly by growth in residential property prices than in commercial property prices. Compared with the closing quarter of 2024, prices for residential properties advanced by 4.2% while commercial property prices, which comprise office and retail property prices, increased by 3.5% in the same period. Compared with the third quarter of 2025, residential and commercial property prices experienced similar growth rates (+1.0% and +0.9% respectively).

“The recovery phase in the property market continued in 2025 – prices are rising steadily, but considerably less strongly than in the low interest rate phase.”
Jens Tolckmitt

“The recovery phase in the German property market continued in 2025 following the abrupt turnaround in interest rates. Prices are rising steadily, but considerably less strongly than in the low interest rate phase,” vdp Chief Executive Jens Tolckmitt pointed out. He went on to say that, given the ongoing housing shortage, residential property prices can be expected to rise further in the current year. He added that the trend in commercial property prices, by contrast, is harder to predict. “Economc developments and geopolitics remain relevant uncertainty factors,” Tolckmitt remarked.

Residential properties: Multi-family house prices up by 5.3%

As in previous quarters, the 4.2% increase in residential property prices in Germany was driven by rising prices for multi-family houses, which were up by 5.3% year on year. Growth in prices for owner-occupied housing, which include single-family houses and condominiums, was markedly lower at +3.0%.

The ongoing housing shortage was reflected, moreover, in further increases in rents under new contracts for multi-family houses in the fourth quarter of 2025. Compared with the closing quarter of 2024, they rose by 3.5%. As rent growth was unable to keep pace with the rise in prices for multi-family houses, however, returns as measured by the vdp index for cap rates contracted by 1.7% year on year.

“Government guarantees could stimulate the creation of additional housing.”
Jens Tolckmitt

“One of the political priorities of 2026 must be to create housing at affordable prices,” Tolckmitt emphasized, adding that many good ideas are already on the table from the work done by the Alliance for Affordable Housing (Bündnis bezahlbarer Wohnraum) during the last legislative period. He pointed out that the new federal government has also provided a targeted impetus with its so-called “Bau-Turbo” initiative to speed up housing construction, although the local authorities still need to give life to the initiative and supplement it with further measures. In this context, Tolckmitt again called for the introduction of government guarantees for the financing of new housing construction in order to stimulate the creation of additional living space and remedy the ongoing situation whereby financing is chiefly provided for existing buildings. In this way, he explained, loan costs could be reduced significantly, thus making new construction economically attractive again. “In view of the historically extremely low default rates in residential property financing and the considerable excess demand in the housing market, the risk that the government would be required to pay up under such an instrument would be low, while the impact on the supply of housing would be substantial if this measure were designed appropriately,” Tolckmitt stressed.

Housing in the top 7 markets: Frankfurt sees strongest price growth

In the fourth quarter of 2025, growth in prices for residential properties in Germany’s top 7 cities was even somewhat stronger than in the country as a whole. Prices for residential properties in Berlin, Cologne, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart rose on average by 4.7% compared with the closing quarter of 2024. Whereas Stuttgart, the capital of Baden-Württemberg, recorded the lowest increase (+2.2%), the highest growth rate (5.7%) was found in Frankfurt am Main in the quarter under review.

The increase in rents under new contract in the top 7 cities averaged 3.5%, matching exactly the trend across Germany as a whole. Growth rates in the seven metropolitan areas ranged from +2.0% (Stuttgart) to +5.0% (Frankfurt am Main). Measured by the vdp cap rate index, returns in the metropolitan areas fell by 1.4% on average in the fourth quarter of 2025 compared with the corresponding quarter one year before.

Commercial properties: Office properties see higher growth rates

Prices for commercial properties financed by banks rose by 3.5% year on year and 0.9% quarter on quarter, and were mainly driven by growth in office prices. Office properties increased in price by 3.9% compared with the fourth quarter of 2024 and by 1.1% compared with the immediately preceding quarter. Prices for retail properties saw lower growth rates of 2.3% and 0.6% respectively.

Compared with the fourth quarter of 2024, financed office properties also showed higher growth rates (+3.3%) than retail properties (+1.8%) with regard to rents under new contracts. By contrast, the trend in returns as measured by the vdp cap rate index was quite similar. Offices recorded a drop in returns of 0.6% while the decline for retail properties was calculated at 0.5%.

Outlook: “Economic stimulus and regulation with a sense of proportion are needed”

“Germany’s housing market is in need of stimulus. Besides scaling back building standards in a targeted manner and quickly implementing the ‘Bau-Turbo’ initiative, a resolute economic-policy stimulus as well as banking regulation with a sense of proportion would be important measures,” Tolckmitt emphasized. In addition, he called for the removal of obstacles to home ownership, as this could substantially reduce the pressure on the rental housing market. Specifically, Tolckmitt proposed lowering ancillary purchase costs, arguing that they are particularly high in Germany.