Housing Market Overview - H2 2024

Ongoing demand with decreasing housing supply

The Berlin housing market in 2024 remains characterized by a severe imbalance between high demand and scarce supply. The federal capital recorded population growth of +0.7% in 2023, bringing the number of inhabitants to around 3.878 million. With 187,971 new arrivals, including 53,144 from abroad, 2023 was the year with the third-highest immigration since 1991.

Construction activity could not keep pace with this development. In 2023, only 15,965 apartments were completed, a decrease of -7.8% compared to the previous year. The political goal of 20,000 new apartments per year was once again significantly missed. Most new buildings were constructed in Lichtenberg (3,410), the fewest in Steglitz-Zehlendorf (345).

A downward trend can also be observed in building permits. With 15,902 permits issued in 2023, the number decreased by -6.3% compared to 2022. This development suggests a further decline in completions for the coming years.

Rent price development in Berlin showed an interesting turn in the second half of 2024. After years of steady increases, offered rents took a growth pause. With minus 1.0 percent or quality-adjusted plus 0.2 percent, offered rents have entered a sideways movement. Despite this short-term stabilization, Berlin remains clearly at the top of rent price development compared to other metropolises, with a total increase of 53.2 percent over the past five years.

Purchase prices for condominiums also showed stabilization. After significant price corrections in previous years, prices only decreased slightly in the second half of 2024. This indicates a gradual stabilization of the residential property market.

The investment market in Berlin remained attractive despite the challenges. An example of this is the purchase of the "Konnekt" project development on the former Knorr-Bremse site in Berlin-Marzahn by the municipal housing company Howoge, which was one of the largest transactions of 2024. Such large transactions contributed to a significant revival of the German residential investment market overall, with a total volume of 9.84 billion euros in 2024.

To counter the housing shortage, the city has introduced various regulatory measures such as rent control and neighborhood protection ordinances. Additionally, in June 2024, a draft "Acceleration Law" was passed, which aims to stimulate housing construction through shortened deadlines and new standards.

Despite these measures, the Berlin housing market remains tense. The continuing population growth coupled with declining completion numbers suggests that the situation will further intensify in the near future. However, the stabilization of rent prices could be an indication that the market has reached a limit in terms of affordability, which might lead to a reorientation of market dynamics.

Dynamic housing market with rising rents and stabilizing purchase prices

The Dusseldorf housing market continued to show robust and dynamic development in 2024. The capital of North Rhine-Westphalia experienced persistently high demand for housing with simultaneously tight supply.

In terms of offer rents, Dusseldorf was among the top performers among German metropolises in the second half of 2024. With an increase of 8.1 percent compared to the previous year, the city was significantly above the average of the examined major cities. This strong increase underscores the continued attractiveness of Dusseldorf as a residential location and the scarcity of available housing.

In the area of purchase prices for condominiums, a stabilization of the market was evident. After the price corrections of recent years, price declines in the second half of 2024 were only minimal. This development indicates that the phase of price adjustments is largely complete and that the market for homeownership in Dusseldorf is regaining attractiveness.

The demand for housing in Dusseldorf is driven by various factors. The city benefits from its strong economic base, which continues to attract workers. In addition, the high quality of life makes Dusseldorf a popular place to live, which puts additional pressure on the housing market.

Dusseldorf also proved attractive in the investment market. The city benefited from the general revival of the German residential investment market, which reached a total volume of 9.84 billion euros in 2024. Investors particularly appreciate Dusseldorf's stable economic situation and the potential for value appreciation in the real estate sector.

The challenge for Dusseldorf remains to create sufficient new housing to serve the increasing demand. As in many other German cities, a decline in building permits and completions is expected here as well, which could further increase pressure on the housing market.

For the year 2025, it is expected that rents in Dusseldorf will continue to rise, albeit possibly at a somewhat slower pace. For purchase prices, increasing price dynamics are expected, with development varying depending on location and quality of the properties.

Overall, the Dusseldorf housing market remains an attractive location for tenants, buyers, and investors. However, the city faces the challenge of expanding the housing supply while ensuring the affordability of housing. Further development will largely depend on how successfully Dusseldorf can shape this balance between growth and sustainability.

Stable housing market with dampened dynamics

The Frankfurt housing market showed robust development in 2024, although further increases in rents and condominium prices remained absent on average.

In terms of offer rents, Frankfurt was in the middle range of German metropolises in the second half of 2024. With a slight decrease of -1% compared to the previous year, the market showed stability. The median rent for existing apartments was 14.55 €/m² in 2022.

In the area of purchase prices for condominiums, a stabilization of the market was evident. After the price corrections of recent years, prices were almost constant in the second half of 2024. The median offer price for existing apartments was 6,090 €/m² in 2022.

The demand for housing in Frankfurt remains high, driven by the strong economic base and high quality of life. However, the number of households decreased slightly from 2021 to 2022 by about 3,000 to 403,530, which is attributed to relocations to the surrounding area during the Corona pandemic.

On the supply side, 3,012 housing units were completed in 2021, significantly below the average since 2015 (3,595 housing units). However, 2023 showed a positive development: A total of 3,661 apartments were completed, representing an increase of +24% compared to the previous year. This value is also slightly above the average of the last ten years.

Despite this positive development in completions, there is a significant decline in building permits. In 2023, only 3,205 building permits for new apartments were issued, which represents a decrease of about -30% compared to the previous year and is also the lowest value since 2010. This suggests a decline in completions for the coming years.

An interesting development is seen in the repurposing of office and commercial spaces. In 2023, 459 of the approved apartments were such repurposings. Although this value is slightly below the previous year's value of 463 conversions, it remains significantly below the peak value of 2018, when 1,985 apartments were created in former office buildings.

Frankfurt has the second-lowest vacancy rate among A-cities after Munich at 0.3%. This underscores the continued attractiveness of the location for housing seekers and investors.

To address the challenges, the city of Frankfurt am Main is currently working on the further development of municipal funding programs and the designation of additional building areas. Around 250 million euros are available in the 2024/25 budget for subsidized housing construction.

Overall, the Frankfurt housing market remains an attractive location for tenants, buyers, and investors, but faces the challenge of creating sufficient new and affordable housing.

Resilient Hanseatic city with ongoing housing demand

The Hamburg housing market continued to show robust development in 2024 despite changed conditions in the real estate markets.

In the rental market, the median rent rose to 16.62 €/m² in the second half of 2024, representing an increase of +7.7% compared to the previous year. The new construction sector in particular showed strong dynamics with an increase to 20.91 €/m², which is a plus of 13% compared to the previous year.

In the condominium market, there was a slight recovery. The median purchase price for existing apartments was 5,544 €/m², representing an increase of +2.1% compared to the previous year. For new construction apartments, the increase was significantly stronger at +9.4% to 8,404 €/m².

With a vacancy rate of only 0.5% - one of the lowest nationwide - a significant demand surplus will continue to dominate the housing market of the Hanseatic city. Consequently, it can be assumed that the pressure on rents will remain high.

Over a five-year period, the Hamburg housing market shows remarkable development:

• Existing rents increased by an average of 4.4% per year.

• New construction rents recorded an annual increase of 5.3%.

• Purchase prices for existing apartments increased by 6.5% per year.

• For new construction apartments, the annual price increase was 9.2%.

These figures underscore the ongoing attractiveness of Hamburg as a residential and investment location. Despite the challenges posed by rising interest rates and construction costs, the Hamburg housing market remains dynamic. Further development will largely depend on how successfully Hamburg can shape the balance between growth, sustainability, and affordability.

Robust housing market with moderate price growth

The Cologne housing market continued to show robust development in 2024, despite the changed framework conditions in the real estate markets.

In terms of offer rents, Cologne was in the middle range of German metropolises in the second half of 2024. With a moderate increase of +3.3% compared to the previous year to 15.49 €/m² median, the market showed stability. Particularly in the new construction segment, the dynamics were noticeable with an increase of +0.8% to 18.65 €/m².

In the area of purchase prices for condominiums, there was a slight recovery of the market. After the price corrections of recent years, prices had risen by +2.4% to 4,820 €/m² median in the second half of 2024.

The demand for housing in Cologne remains high, driven by the strong economic base and high quality of life. The number of households decreased slightly from 2021 to 2022 by about 5,800 to 575,542. Despite this slight decrease, the housing market in Cologne remains tight, which is reflected in rising rents and purchase prices.

On the supply side, a total of 3,533 apartments were completed in 2023, representing an increase of +52% compared to the previous year. The number of building permits in 2023 was 3,211, which is above the average of the last five years.

With a vacancy rate of only 0.9% - one of the lowest nationwide - a significant demand surplus will continue to dominate the housing market in the cathedral city. Consequently, it can be assumed that the pressure on rents will remain high.

To address the challenges, the city of Cologne is currently working on the further development of municipal funding programs and the designation of additional building areas. At least 100 million euros are available for subsidized housing construction in the 2024 housing promotion program of the state of North Rhine-Westphalia.

Overall, the Cologne housing market remains an attractive location for tenants, buyers, and investors, but faces the challenge of creating sufficient new and affordable housing.

Housing shortage despite increasing completion numbers

The Leipzig housing market is currently in an acute crisis: The housing shortage in Leipzig is comparable to the situation after reunification about 30 years ago. There is not enough supply available for relocations or new arrivals, resulting in overall low fluctuation.

A decisive factor for the current housing shortage is the ongoing immigration to Leipzig. Over the past five years, Leipzig's population has grown by +5.4% overall. The Leipzig housing market has been experiencing a tightening of the supply-demand ratio for years.

This development is also reflected in rental and purchase prices. In the second half of 2024, offer rents increased by +9.9 percent compared to the previous year to 10.45 €/m² median. This is the highest increase among the Big 8 cities. Over a five-year period, rents even increased by +44.1 percent. For condominium purchase prices, there was a slight stabilization. With an increase of +0.7 percent compared to the previous year to 3,008 €/m² median, this indicates a gradual stabilization of the homeownership market.

The number of completed apartments has fluctuated in recent years. In 2023, a total of 3,533 apartments were completed, representing an increase of +52% compared to the previous year. This amounts to about 41 completed apartments per 10,000 inhabitants, placing Leipzig among the top positions behind Munich and Frankfurt compared to other Big 8 cities.

However, building permits issued in 2023 decreased by -27% compared to the previous year to a total of 2,287 building permits. This could lead to a decline in completions in the coming years.

To counteract this trend, the city of Leipzig updated its housing policy concept in the first half of 2024. Based on this, the city aims to preserve affordable housing in all districts of Leipzig and create new housing even in times when new housing construction is weak. As part of the updated concept, the housing supply is to be increased and improved through strategic land acquisition, social preservation statutes, and social housing promotion.

High prices and dampened dynamics in the housing market

The Munich housing market remains the most expensive in Germany in 2024, but shows dampened price development. As a vibrant economic metropolis with the highest purchasing power per inhabitant among German major cities, Munich maintains its top position, but faces challenges.

Rent price development in Munich showed a moderate increase in the second half of 2024. Offer rents increased by +3.7% compared to the previous year to an average of 23.33 €/m². In the new construction segment, the increase was slightly stronger at +4% to 21.85 €/m². Over a five-year period, rents increased by 16.6%, which is rather moderate compared to other metropolises.

For condominium purchase prices, a slight stabilization was evident. After significant price corrections in previous years, prices only decreased slightly in the second half of 2024. With an increase of 1% compared to the previous year to 8,790 €/m² median for existing apartments, this indicates a gradual stabilization of the market for homeownership. New construction apartments cost an average of 11,050 €/m², an increase of +11% compared to the previous year.

The supply of housing can hardly meet the demand. With a vacancy rate of only 0.2%, Munich continues to have the lowest vacancy rate in the entire country. However, construction activity showed positive development in 2023: A total of 9,837 apartments were completed, representing an increase of +31% compared to the previous year. Even in relative comparison with the other Big 8 cities, Munich leads with about 62 completed apartments per 10,000 inhabitants. The number of building permits also increased: The local building commission issued 9,083 building permits last year, an increase of +12.3% compared to the previous year. On average, just under 9,700 apartments per year have been approved in the last five years. Nevertheless, the additional demand for housing units exceeds the completion level even in the Munich housing market.

Despite the changed framework conditions, the overall market continues to show robust development. Munich remains an attractive location due to its economic strength, the headquarters of numerous corporations, and its high leisure and living value.

For the future, continued pressure on existing rents is expected, as completion numbers are likely to continue to decline and the population is growing. For purchase prices, the phase of price corrections seems to be largely complete. In the medium term, further rising rent levels are expected, while the price-finding phase in the purchase market could continue for a while.

Stable rents and slight recovery in purchase prices

The Stuttgart housing market showed largely stable development in the second half of 2024, with a slight recovery in purchase prices for condominiums. Offer rents increased moderately by 3.1% compared to the previous year to an average of 16.50 €/m². This puts Stuttgart in the lower range of rent price development among the examined major cities.

For existing rents, the increase was slightly more pronounced at +3.9%. For new construction apartments, however, rents decreased slightly by -2.2%, with a minimal increase of +0.7% remaining after quality adjustment. Over a 5-year comparison, rents in Stuttgart have increased by +11.8% overall, which represents a rather moderate development compared to other metropolises.

For condominium purchase prices, a stabilization is emerging. After prices had corrected significantly in previous years, they only decreased slightly by -2.9% to an average of 4,574 €/m² in the second half of 2024. This indicates a gradual stabilization of the homeownership market. Existing apartments were offered at an average of 4,452 €/m², while new construction apartments were significantly more expensive at 8,528 €/m².

Completion figures showed positive development in 2023. With a total of 1,891 completed apartments, a level was reached that corresponds to that before the Corona pandemic. This represents an increase of 86% compared to the previous year. At the same time, the existing construction backlog decreased by 17%.

However, building permits in 2023 fell to the lowest level in the last ten years. Only 1,092 building permits were issued, 6% fewer than in the previous year. With only 19 building permits per 10,000 inhabitants, Stuttgart lags significantly behind other major cities.

To stimulate housing construction, the city of Stuttgart plans to enable the construction of 20,000 new apartments by 2033. 30% of the newly created apartments are to be realized as social housing and a further 10% as price-dampened rental or owner-occupied apartments.

For 2025, a further decline in completions is expected due to the low number of building permits, which is likely to increase pressure on the housing market. Rents are expected to grow moderately, while purchase prices are likely to continue stabilizing and could slightly increase over the course of the year.

The German housing market in 2024 was characterized by a severe imbalance between high demand and scarce supply, especially in large cities and metropolitan regions. The housing shortage further intensified, exacerbated by declining completion numbers amid rising demand.

In the eight examined metropolises, offer rents increased by an average of 4.9%, with significant regional differences. The sharply declining vacancy rate across Germany contributed to this development.

Construction activity fell short of targets. In 2023, only 294,400 apartments were completed, a decrease of 0.3% compared to the previous year and far from the federal government's goal of 400,000 apartments per year. A further deterioration is expected for the coming years: Completions could decline from around 200,000 (2024) to 160,000 (2026).

Several factors are hindering housing construction:

1. Sharply increased interest rates and construction costs

2. Lack of suitable building land, especially in urban areas

3. Extended construction times: Average of 24 months between approval and completion.

Building permits decreased by 26.7% to 259,600 in 2023, falling below the number of completions for the first time in a long while. The construction backlog decreased to 826,800 apartments, of which 390,900 were under construction and 214,500 in the shell construction phase. 22,700 building permits expired.

Demand is supported by population development, with an increase of about 170,000 inhabitants in 2023. Long-term growth is forecast in economically strong cities and regions.

The gap between supply and demand is growing. Experts estimate that the new construction gap could grow to over 1 million apartments by 2027, making a balance unlikely in the 2020s. This poses major challenges, particularly for the creation of affordable housing.

Without significant changes in housing policy and economic framework conditions, no easing is expected soon. The persistent scarcity is likely to lead to further rent increases and increase pressure on urban planners and politicians to find innovative solutions for housing provision.

The German housing market in 2024 was characterized by a persistent imbalance between high demand and scarce supply, especially in large cities and metropolitan regions. The main drivers were wage increases, low fluctuation, and international immigration. At the same time, completion numbers decreased while demand increased.

The growing gap between existing and new contract rents reduced the willingness to move and the volume of offerings, which reduced the efficiency of rental housing markets and increased the demand for home ownership. Despite regional differences, market conditions led to positive earnings and high occupancy rates.

Rising interest rates and construction costs exacerbated the situation, hampering transactions and housing construction. Many projects were delayed or abandoned, and some developers went bankrupt. The price increase for condominiums stagnated, leading to a wait-and-see attitude among market players.

The population grew by 1.1 million inhabitants between 2021 and 2022, with further increases in 2023. Forecasts predict stabilization at 85 million inhabitants by 2030. The decreasing vacancy rate indicates accelerated rent price growth.

Building completions are expected to continue declining until 2026, with estimates of about 200,000 completions in 2024, potentially dropping to 160,000 in 2026. This is far below the federal government's target of 400,000 completed apartments per year.

Overall, the German housing market in 2024 was characterized by persistently high demand, further intensified by various socioeconomic factors and insufficient new construction activity. This situation led to rising rents and an increasing attractiveness of residential properties as investment objects, despite challenges in the construction sector.

In the second half of 2024, the rental housing market in Germany's eight largest metropolises - Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Leipzig, Munich, and Stuttgart - showed subdued but still positive dynamics. The average increase in offer rents was +4.9 percent year-on-year, representing a slowdown compared to the first half of 2024 (+6.3 percent) and the previous year (+8.2 percent).

Regional differences significantly shaped the picture. Leipzig led with a remarkable rent price increase of +9.9 percent, followed by Frankfurt (+8.6 percent) and Dusseldorf (+8.1 percent). Hamburg also recorded an above-average increase of +7.1 percent. Increases were more moderate in Munich (+3.7 percent), Cologne (+3.3 percent), and Stuttgart (+3.1 percent).

The development in Berlin was particularly noteworthy. The capital, often a leader in rent increases, experienced a trend reversal with a slight decrease in offer rents by -1.0 percent (quality-adjusted* +0.2 percent). This indicates a possible stabilization of the previously particularly dynamic Berlin rental market.

For existing apartments, rent price dynamics were stronger at +6.8 percent compared to new buildings (+3.3 percent). Particularly significant increases in existing rents were seen in Leipzig (+12.7 percent), Hamburg (+11.6 percent), and Cologne (+10.5 percent). In the new construction segment, Hamburg led with an increase of +13 percent, followed by Frankfurt (+8.4 percent) and Leipzig (+5.8 percent). Berlin and Stuttgart recorded slight decreases of +2.2 percent each in this segment.

Munich remained the most expensive metropolis for rental apartments with an average of 23.33 €/m²/month, followed by Berlin (19.23 €/m²/month) and Frankfurt (18.33 €/m²/month). Leipzig was the most affordable at 10.45 €/m²/month. The development of prime rents paralleled median rents with an average increase of +4.7 percent in the eight metropolises.

For 2025, a further increase in rents in the metropolises is expected, albeit at lower rates than in previous years. Rent development is likely to increasingly differentiate according to regional conditions, depending on local demand surpluses and the availability of rental apartments.

Overall, the rental housing market in German metropolises shows a tendency towards stabilization, with specific local market dynamics continuing to play an important role.

*In the quality-adjusted consideration of price development, changes in the datasets of the half-years regarding the condition and equipment of the properties as well as regarding micro-locations are factored out using a hedonic approach. All trends are checked for validity, even if this is not explicitly mentioned in the text.

The German purchase market for residential properties showed clear signs of stabilization in the second half of 2024. The phase of price corrections observed over the past two years seems to be largely complete. On average, advertised purchase prices for existing and new apartments have only slightly decreased by 0.8 percent, which represents a significant improvement compared to the previous year when a minus of 7.5 percent was recorded.

Interestingly, regional differences in price development emerged. Some cities already showed positive developments: Hamburg (+2.5 percent), Cologne (+2.4 percent), Frankfurt (+1.9 percent), and Leipzig (+0.7 percent) recorded price increases, while other cities still experienced slight decreases.

For existing apartments, offer prices fell by an average of -0.5 percent, which is a significant improvement compared to the previous year (-8.5 percent). For new buildings, the decrease was -1.7 percent, slightly below the previous year's level (-2.6 percent).

Munich remains the most expensive city for existing apartments with an average of 7,952 €/m², followed by Frankfurt am Main (5,724 €/m²) and Hamburg (5,544 €/m²). Despite the stabilization, prices in these cities are still significantly below the peak levels of the first half of 2022.

For new apartments, Munich also leads with an average of 11,253 €/m², followed by Hamburg (8,404 €/m²), Stuttgart (8,528 €/m²), and Frankfurt am Main (8,088 €/m²).

The normalization of the ratio between purchase and rental costs has made home ownership more affordable again, leading to increased demand for home ownership. This development is reflected in the stabilization of purchase prices.

For the future, increasing price dynamics are expected, with adjustment speeds likely to vary depending on the location and quality of the properties. Overall, the purchase market for residential properties shows a clear tendency towards stabilization, with regional differences and a possible return to moderate growth in some markets.

Authors
Sandra Baumgarten, Senior Research Analyst

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Dr. Sören Gröbel, Director of Living Research, Germany

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