Real estate prices are changing: How metropolitan areas are in the shadows!

Real estate prices are changing: How metropolitan areas are in the shadows!

The situation on the German real estate market has changed significantly in recent years. While prices rose by 117 percent from 2011 to 2024, there was a decline of 3.7 percent between June 2022 and the end of 2024. Owner-occupied properties, which have lost value compared to peak prices by mid-2022, are particularly affected. Owners and prospective buyers are therefore faced with the question of how prices will develop in the future. Particularly in metropolitan areas such as Düsseldorf or Frankfurt, single-family homes reach almost a million euros, while in less popular regions such as Erfurt, Saarbrücken or Bremen the prices fall to a third.

The real estate market as a whole is considered overvalued, with a price/rent ratio of around 24. The fall in prices is caused by an imbalance in supply and demand, with significant differences depending on the region. Falling fertility rates and an aging population are dampening demand. At the same time, it is assumed that there will be a net migration that could compensate for the excess number of deaths in Germany, with metropolises growing through influx and peripheral regions shrinking.

Regional differences and future forecasts

According to current forecasts from Postbank Wohnatlas 2025, a moderate real price increase of around 0.4 percent per year is expected for condominiums until 2035. There are also strong regional differences: strong increases in value are forecast in the south as well as in the greater Berlin area, the Rhine region and the Rhine-Main region. In contrast, falling prices can be expected in regions such as Saarland, northern Hesse, the Ruhr area and eastern Germany. The need for an increased supply of building land in these tight housing markets is becoming increasingly evident.

A central aspect remains the availability of building land. Due to the shortage of building land and rising land prices, the housing market is very tense. The declining productivity of the construction industry is reflected in higher new construction costs, which are now almost a third higher than the 2021 level. Quick relief through a relaxation of building standards is not expected, as the climate targets in the building sector play a crucial role and a return to the old energy policy is not planned.

Construction price index and construction cost index

In this context, the differentiation between the construction price index and the construction cost index is also important. These terms are often incorrectly interchanged. The Federal Statistical Office points out that requests for the “construction cost index” often refer to the construction price index. The latter reflects the producer sales prices for the construction industry and shows the purchase prices of buyers and developers. In contrast, the construction cost index documents the development of prices excluding sales tax for production factors in the construction of new residential buildings, which include labor and materials.

Overall, the challenges in the real estate market remain complex, especially in view of the necessary housing construction subsidies. Measures planned in the coalition agreement could increase existing imbalances. A look at the long-term potential for value increase in the areas surrounding large cities also shows that peripheral locations are likely to lose value.

For more information on property price developments in Germany, read the detailed analysis Young freedom and the explanations of the construction price index Destatis.