In the German housing market, the shortage of rental supply continues unabated. According to the latest housing market report by real estate services firm CBRE, average asking rents across the top 20 residential markets rose by 3.6 per cent year-on-year in the third quarter of 2026 and by 0.8 per cent compared to the previous quarter. Although the number of building permits has recently picked up again, including in the multi-family housing segment, the overall level still lags well behind the figures recorded five years ago.
While the advertised supply of rental flats is declining noticeably, the number of condominiums on offer is increasing. Jirka Stachen, Head of Research Consulting Continental Europe at CBRE, views the slight recovery in residential construction loans as a positive signal. Nonetheless, a perceptible easing of the rental market is not in sight, and declining migration into major cities is doing little to change this for now. High construction costs, financing expenses and economic uncertainties continue to weigh on development projects.
Ancillary costs limit scope for rent increases
Although rents continue to climb, momentum is slowing compared to previous years. A key reason lies in the overall burden of rent and operating costs. In the third quarter of 2026, operating costs increased year-on-year by an average of 2.0 per cent nationwide and by 2.4 per cent in the top 7 cities. Michael Schlatterer, Managing Director Residential Valuation Germany at CBRE, stresses that geopolitical risks and disruptions in energy markets could exacerbate cost pressures on tenant households again at any time.
Meanwhile, stabilisation is emerging in the condominium market. In the third quarter of 2026, the purchase price index for the top 20 cities recorded a 2.0 per cent increase compared to the previous year. At the same time, marketing periods are shortening in most major cities, most notably in Cologne, Dresden and Duisburg. Schlatterer points to regional differences: while automotive-focused locations affected by structural change remain hesitant, regions benefiting from modern industrial investment are generating stronger demand.
Subsidised housing moves into the focus of institutional investors
Recent tightening in financing conditions is weighing on the investment environment. Prime yields for residential property in the top 7 markets and yields on ten-year federal bonds recently converged almost entirely; the yield spread dropped to minus four basis points, eliminating the yield premium for residential investments. The activity of institutional players is therefore increasingly focusing on selective acquisitions.
Stefan Wilke, Head of Residential Investment Germany at CBRE, notes that developers and investors are increasingly seeking affordable and subsidised housing as a result of the challenging conditions for privately financed new construction. However, the regionally fragmented subsidy landscape hampers broad cross-regional strategies. By the end of the year, the report expects rent increases to continue, albeit at a more moderate pace, while the recovery in purchase prices proceeds without significant spikes.
