Real estate prices are rising rapidly: home ownership is becoming a luxury item!

Real estate prices are rising rapidly: home ownership is becoming a luxury item!

The housing market in Germany remains under pressure. According to a current forecast by the Volks- und Raiffeisenbanken, the price increase for residential real estate will be around 3.2% in 2025, followed by a further increase of 3.1% in 2026. This development makes it increasingly difficult for many households to achieve home ownership. The market is tight, and the decline in new housing construction and soaring construction costs are contributing to a shortage of supply, particularly for families looking to own their own home.

The price increases are particularly noticeable in the seven largest cities in Germany: Berlin, Hamburg, Munich, Cologne, Frankfurt/Main, Stuttgart and Düsseldorf. Here, property prices rose more than a third faster than disposable incomes from 2007 to 2024. The nationwide increase in property prices was 16% higher than income growth during this period. The purchase price situation is also exacerbated by the average annual net income of 6.4 that has to be spent on purchasing a property.

Regional differences and price developments

A look at the regional differences shows that in Munich, the most expensive city in Germany, buyers have to raise an average of 14.7 annual net income, while in the Hildburghausen district, one of the cheaper regions in southern Thuringia, only 1.8 annual net income is required. The revival of prices after a temporary decline following a property boom makes the situation even more problematic for potential buyers.

The latest analysis shows that rents in cities are also rising sharply, making the situation worse for those interested in renting. With these developments, it is clear that the affordability of housing will remain a central issue in Germany. The situation could worsen further if new construction continues to decline, as has already been observed in recent years.

In summary, it can be seen that there is hardly an end to the price increase in sight and the challenges on the housing market are increasing. The Market mirror and Manager Magazine illuminate the current trends and forecasts that will continue to be important for many residents of Germany in the coming years.