The German real estate market continues to be characterized by rising rents alongside stagnant purchase prices. According to the Housing Index published by the Institute of the German Economy (IW), the purchase prices for condominiums and single- and two-family homes only increased by 0.8 percent year-over-year in the second quarter of 2026. In contrast, offered rents rose significantly nationwide by four percent. Rents increased particularly sharply in Cologne (+7.9 percent), followed by Hamburg (+5.5 percent) and Leipzig (+5.4 percent). This rate of rent increase far exceeded the national inflation rate of 2.6 percent.
A shortage of rental properties is a major issue in the rental market. Nationally, nearly twelve percent fewer rental units are listed compared to the start of 2022. This lack of supply is even more drastic in several major cities: the rent offering in Hamburg has been cut by more than half (-57 percent), and listings in Frankfurt am Main and Leipzig are down by 43 and 40 percent, respectively. Berlin is the only exception, showing a 43 percent increase compared to 2022. However, the IW notes that this increase is primarily artificial, driven by the fact that previous rent caps had severely suppressed supply. Just in the first quarter following the cap’s introduction, the city’s offering had dropped by 39 percent.
The situation on the sales market is different: listings for condominiums and single- and two-family homes nationwide have nearly doubled compared to the start of 2022. This increase is not due to more construction. Instead, higher financing costs have narrowed the pool of potential buyers and extended the time required for sales. Consequently, properties are being listed more often and spending more time on online portals.
IW real estate economist Pekka Sagner commented that the rental market suffers not only from a lack of new construction but also a lack of movement within existing stock. “Relocation mobility is too low,” he stated, “meaning existing housing is not being fully utilized. Even stricter rent regulations would amplify this effect, further restricting options for those searching for accommodation.”
