German house prices – how robust is the recovery?
The prices for residential properties in Germany are likely to continue rising moderately for the foreseeable future.
Commerzbank Economic Research
06/13/2025
Real estate prices have been rising for one and a half years ...
The prices for residential properties – measured by the monthly data from Europace which show a high correlation with the quarterly data from the Federal Statistical Office – have steadily increased over the past one and a half years. Although there have been occasional minor setbacks in the subcomponents for existing and new construction properties, the trend also points upwards for both subcategories. However, the prices for existing properties and thus overall real estate prices are still lower than their peak in the spring of 2022.
... as lower interest rates and higher incomes ...
One reason for the recovery in real estate prices was the improved financing conditions. Currently, mortgage interest rates are around 3.6%, which is lower than their interim peak of about 4% at the end of 2023. At the same time, the disposable incomes of households increased by an average of 5% per annum in 2023/24. This rise was significantly higher than consumer prices, resulting in an annual increase of about 1½% in real wages.
Together, these two factors have made it easier for buyers to finance a property again. Our affordability index, which relates disposable incomes to the amount of a hypothetical debt service (interest and repayment), has partially recovered from the decline caused by the sharp increase in mortgage interest rates between early 2020 and spring 2022. As a result, homes are still significantly harder to finance for buyers than during the ECB’s zero and negative interest rate policy period. However, they are similarly affordable as they were in the years 2006 to 2010, when a long-term rise in house prices began.
For full text see attached PDF-Version.
