The German residential property market remains in a challenging state in the second half of 2026, characterised by significant differences between individual market segments. In particular, existing properties that have not been energy-modernised are only finding buyers with substantial price reductions. In contrast, properties with comparatively small investment volumes, as well as high-end luxury properties, continue to prove robust. Sotheby's International Realty observes increasing polarisation within these market segments. Mr Tobias Schulze of Sotheby's International Realty in North Rhine-Westphalia describes the current situation in many segments as an extreme buyer's market.
Selling properties whose energy efficiency is no longer up to date and for which buyers must factor in significant renovation investments is proving particularly challenging. In these cases, it is observed that even prices at the level of standard land values can no longer be easily achieved, as the price expectations of sellers and buyers often still diverge widely. This divergence manifests itself in the fact that, on the one hand, properties with a low purchase price and, on the other hand, exclusive properties in the high-price segment are particularly sought after. The mid-price segment, especially where additional modernisation and energy costs are incurred, is proving difficult.
Dynamics in the Premium Segment and Importance of Energy Efficiency
Nationwide, the price correction is not yet fully complete. Mr Olivier Peters of Sotheby's International Realty in Frankfurt am Main and Wiesbaden reports land discounts of around 20 per cent compared to earlier price expectations. He emphasises that the market is still in an adjustment phase and the transformation is not yet over. At the same time, however, individual segments are detaching themselves from the overall market. This applies particularly to high-quality, new-build properties in very good locations. In the luxury segment, starting at approximately three million EUR, demand remains strong, according to Sotheby's International Realty. Quality, location, amenities and a market-appropriate price are crucial factors here. Mr Peters highlights that new-build luxury is the core segment that continues to perform, as buyers in this price bracket are looking for an exceptional product and not merely square metres. Nevertheless, buyers in the premium segment have also become more selective; inflated asking prices lead to longer marketing periods. Realistically priced properties, however, find takers. The precise determination of the actual market value is crucial today, as sellers are sometimes still orienting themselves towards peak prices from past years, which are no longer achievable in many segments.
The energy efficiency of a property has established itself as a significant price factor. Buyers today consider not only the purchase price but also factor in necessary investments in heating, insulation and windows when arranging financing. These costs directly influence price negotiations. Mr Schulze explains that a house with significant energy modernisation needs is valued differently today than it was a few years ago, as buyers calculate very precisely. If a high six-figure sum has to be invested after purchase, this must be reflected in the purchase price. Owners wishing to sell a property outside the top luxury segment are therefore advised to adjust their price expectations early to the changed market conditions, as waiting for previous price levels is associated with risks.
Interest Rates, Building Permits and the Role of Specialists
The further development of financing costs remains a factor of uncertainty. Mr Schulze does not expect buyers to be relieved in the short term by significantly more favourable financing conditions and warns against relying on an easing through falling interest rates. On the contrary, another interest rate increase is to be expected. In the mid-price segment, the monthly burden is a decisive factor for the affordability of a property. Rising financing costs thus also limit the scope for purchase prices.
Even the recent increase in building permit figures is not interpreted by Sotheby's International Realty as a signal for a fundamental easing of the housing market. Mr Schulze points out that while every additional building permit is positive, the low baseline must be considered. Percentage increases can quickly seem impressive, but the actual number of realised and completed dwellings is what matters. High construction costs, financing costs and numerous insolvencies continue to burden the industry. Germany therefore needs not only more permits, but primarily increased, actually implemented housing construction. The more demanding market situation also changes marketing requirements: a realistic valuation, targeting suitable buyers, and access to a supra-regional or international network are crucial, especially for specialised and high-value properties. In a differentiated market, the importance of specialised expertise becomes apparent.
