Historically, the residential property market in Germany has been predominantly in private hands and characterised by a fragmented structure. Currently, the number of private landlords is at a high level. However, studies indicate that increasing dissatisfaction within this group could lead to a change in market structure. Should more properties come onto the market as a result of this development, particularly portfolios with a significantly double-digit number of units, opportunities will open up for institutional investors. Approximately 64 percent of existing residential properties are held by small landlords, of whom around 58 percent own only a single rental property.
Increasing regulations, particularly in the area of EU sustainability requirements and tenant protection, increase administrative effort and can negatively impact returns. According to the Landlord Report 2026 by the German Economic Institute (Institut der deutschen Wirtschaft), the typical private landlord for residential properties in Germany is on average 58 years old. They own a single, unfurnished apartment of average quality in a multi-family house in a good to very good location and have typically been active as a landlord for over ten years. Rental income primarily serves as a supplementary source of income.
The market environment of the 2010s, with historically low interest rates and a growth in residential property supply, contributed to an increase in the number of private landlords. Between 2010 and 2022, the proportion of private landlords among households in Germany rose from 10 to 13 percent, representing an increase from 3.7 million to over 5.5 million people, as stated by the Socio-Economic Panel (SOEP) of the German Institute for Economic Research (DIW).
Challenges and tendencies to withdraw
Current surveys show, however, that legal frameworks are crucial for the attractiveness of private renting. A PwC survey in German cities with over 500,000 inhabitants revealed that every second private landlord is considering selling their rented property. Reasons cited include rising construction costs, which increase the financial outlay for maintenance and modernisation. In addition, frequent changes in regulatory requirements, such as the Heating Act, and rent regulation further burden landlords. 72 percent of respondents see rent regulation as reducing the attractiveness for investments in rental apartments.
Regionally, a declining willingness to rent out is also manifesting. A survey by the landlord association “Haus&Grund” among landlords in Baden-Württemberg, where 80 percent of rental apartments are provided by private individuals, revealed that 62 percent of private landlords consider a partial or complete cessation of their letting activities to be probable to very probable. This is in the context of a strained market environment with inflationary tendencies, rising construction and financing interest rates, and further regulatory packages.
Potential for institutional players
The planned reform of tenancy law, should it be passed in its current form, envisages further requirements for landlords. These include restrictions on circumventing the rent control (Mietpreisbremse), a price cap for furnished apartments, the softening of sanctions for rent payment arrears, and price limits for index-linked rents. These stipulations impair the predictability and profitability of the letting business. In contrast, there is an increased investment need for the energy-efficient refurbishment of existing properties, driven by EU regulations such as the Fit for 55 legislative package.
- —Only 54 percent of the small landlords surveyed have carried out at least one energy-efficient refurbishment measure in recent years.
- —60 percent of small landlords currently have no further modernisation measures planned.
Demographic change will lead to a significant number of existing residential properties changing hands in the coming decades. Greenwater Capital is already observing that heirs are increasingly unwilling to retain inherited residential properties for continued letting, and instead aim for a swift sale without optimising returns. This development generates opportunities for institutional investors. Portfolios previously held privately often exhibit high quality, alongside market-appropriate prices, which manifests in the condition of the property, good locations, and high tenant satisfaction. Continuous and personal management of properties and their tenants enables a smooth change of ownership and can contribute to stabilising the residential property supply, as explained by Adalbert Pokorski, founder and managing director of Greenwater Capital GmbH.
