The German residential investment market reached a transaction volume of nearly EUR 5.9 billion in the first three quarters of 2026. This result is approximately four per cent below the level of the previous year's period. The third quarter contributed significantly to the total volume, representing the strongest quarter of the year to date with approximately EUR 2.3 billion. Market activity during this period was primarily shaped by larger transactions of existing portfolios and by international capital.
Analysis by global real estate services provider CBRE shows that the investment volume in the third quarter increased by 17 per cent compared to the previous quarter. Stefan Wilke, Head of Residential Investment Germany at CBRE, noted that significant portfolio transactions drove this development. With a share of approximately 25 per cent of the total German real estate investment volume, residential property once again established itself as the leading asset class in the first three quarters of 2026. The recovery in the third quarter resulted from a few extensive portfolio transactions, which accounted for more than half of the quarterly volume. Portfolio transactions reached a share of around 75 per cent in this quarter, while existing properties accounted for 89 per cent of the volume. Concurrently, the number of transactions decreased from 51 to 44 compared to the previous quarter. In this environment, CBRE facilitated the successful sale of two Berlin residential portfolios comprising a total of around 800 flats.
Focus on Existing Properties and International Investments
Investments in existing properties and completed new builds continue to dominate the market, while forward purchases and forward fundings remained subdued. Michael Schlatterer, Managing Director Residential Valuation Germany at CBRE, attributed this to the reduced project pipeline in the multi-family housing segment. The currently limited feasibility of exit prices leads to fewer project starts and an increased insolvency risk on the developer side.
International capital proved to be a key pillar of market liquidity. Foreign buyers accounted for around three-quarters of the investment volume in the third quarter, focusing primarily on larger portfolio transactions. This underscores the attractiveness of German residential properties for international investors. The result was significantly influenced by larger Core-Plus, Value-Add, and opportunistic transactions. Value-Add and opportunistic strategies together accounted for approximately 58 per cent, while Core and Core-Plus strategies made up around 42 per cent. Mr Wilke pointed out that investors with discretionary capital and an active asset management approach are currently more capable of acting, whereas traditional Core investors are operating more selectively due to higher financing costs and increased return requirements.
Market Conditions and Outlook
Germany's top-7 residential markets remain significant target markets for institutional and international capital. Jirka Stachen, Head of Research Consulting Continental Europe at CBRE, explained that location analysis, in-depth opportunity and risk analyses within the framework of commercial due diligence, and detailed advice on acquisition mandates are gaining increasing importance. Alongside the metropolitan areas, regional markets are also coming into focus, provided that attractive risk-return profiles and scaling opportunities are identified there. Berlin remains the largest German residential investment market. At the same time, nationalisation debates and rent regulatory discussions there increase the need for scrutiny, particularly among risk-averse investors. In cities like Stuttgart, the potential effects of structural change in the automotive industry on employment, immigration, and rental demand are being analysed more closely. However, attractive funding models can improve investment calculations and compensate for risks.
Pricing remained challenging in the third quarter. Many sales processes were renegotiated, price-adjusted, or postponed before completion. The average prime yield for multi-family homes in the top-7 cities increased by 0.2 percentage points to 3.59 per cent compared to the previous quarter. Drivers of this development were altered capital market conditions, higher financing costs, and increased distribution requirements. Mr Schlatterer emphasised that the rise in prime yields and the associated price adjustments created more attractive entry opportunities for many investors than in previous quarters. The yield adjustment is primarily capital market-driven and does not reflect a fundamental deterioration in housing market data. The economic realisation of investments, especially in project developments and energy efficiency measures, critically depends on viable financing conditions and attractive funding opportunities.
Mr Wilke added that capital is generally available but is being deployed more selectively and on an object-specific basis. The stronger reaction in the prime segment is due to the higher sensitivity of core capital to the yield spread over less risky fixed-income investments. A transaction volume of around EUR 8 billion is forecast for the full year, which would correspond to the level of the previous year. Achieving this volume largely depends on the completion of further major portfolio transactions in the final quarter. Given the current capital market environment, a further moderate expansion of prime yields is expected by the end of the year.
