The housing market report for 2026/2027 compiled by Colliers summarises the key developments in the German housing market, from supply and demand to investment activity. A central finding of the analysis is the continued decline in residential construction, which contrasts with the continuous demand pressure, particularly in Germany's metropolitan areas. Last year, only 206,600 residential units were completed. Colliers forecasts a further 10 per cent decline to around 185,000 homes for 2026. In parallel, the number of households in Germany's 50 largest cities is expected to increase by approximately 408,400 by 2040.
Demographic Developments and Housing Production
At the end of 2025, Germany recorded a population of approximately 83.5 million people, representing a slight decrease of 0.1 per cent compared to the previous year. This minimal decline is primarily due to lower net immigration. However, for long-term demand trends in metropolitan regions, this has only minor effects. By 2040, an increase of around 408,400 households is anticipated for Germany's 50 largest cities, with 291,900 households alone attributable to the Top-7 cities. The number of smaller one and two-person households is growing disproportionately. Francesca Boucard, Managing Director, Head of Market Intelligence & Foresight at Colliers, points out that the moderate population decline of the previous year does not reduce the long-term high demand for housing in large cities. She emphasises the importance of household development, as the increasing number of smaller households in metropolitan areas meets a continuously tight housing supply.
New construction activity continued its decline in 2025. The volume of completed housing units, at 206,600 units, was 18 per cent below the previous year's figure and reached its lowest level in 13 years. A further decrease of 10 per cent to approximately 185,000 homes is projected for 2026. A first positive signal comes from building permits, the number of which rose by 10 per cent to 238,500 in 2025 for the first time in years. However, due to the typical time lag between approval and completion, this will only manifest in the market supply with a significant delay. Ms Boucard notes that while the increased approval figures represent an important signal, they do not signify an immediate reversal of the trend in residential construction. The expected completion figures for the coming years are not sufficient to noticeably expand the housing supply and reduce the existing demand overhang.
Rental Market Development and Investment Activities
The supply of rental properties has recently stabilised slightly after several years, although housing remains scarce. In the Top-7 cities, asking rents for existing properties rose by 2.5 per cent over the last twelve months to an average of EUR 16.75 per square metre. Prime rents increased by 5 per cent to EUR 24.05 per square metre. In the 50 largest cities, average rents were EUR 12.15 per square metre. In the new-build segment, rental development was more moderate; in the Top-7 cities, average asking rents remained largely stable. Colliers expects further rental increases in both existing and new-build sectors in the medium to long term due to low new construction activity. The altered household structure also reinforces demand for alternative living concepts such as micro-apartments, student housing, and serviced apartments, which already account for over 15 per cent of the rental supply and are developing into an integral part of the German housing market.
In the German residential investment market, a total of EUR 44.6 billion was transacted in 2025, representing a 6 per cent increase compared to the previous year. Development varied significantly depending on the market segment. The market for residential and commercial buildings, predominantly shaped by semi-institutional and private investors, saw significant growth in 2025. Transaction volume increased nationwide by 13 per cent to EUR 35.5 billion. In the cities examined by Colliers, the number of sales increased by 12 per cent, with smaller properties being traded more frequently. Florian Tack, Managing Director and Head of Residential Germany at Colliers, highlights that investors are once again increasingly utilising attractive entry opportunities but are proceeding very selectively. The crucial question today is which properties are economically viable under current financing conditions.
The institutional residential investment segment showed divergent development in 2025: transaction volume decreased by 14 per cent to EUR 9.1 billion. Investors scrutinised more carefully, and large-volume portfolio transactions were absent. Financing conditions have tightened further in the current year 2026, banks are acting more restrictively, and higher financing costs complicate the execution of transactions. Yields for residential investments rose by an average of 25 to 30 basis points. For young existing properties, typically around ten years old, the prime yield in the Top-7 cities at mid-2026 is 4.1 per cent and 4.8 per cent in the other examined locations. Capital interest remains high despite these challenges, while price discovery is shaping market activity.
