The residential property market in Germany can look back on a year 2024 that was characterized by stabilization trends and regional differences. Following the sharp price declines of the previous year, prices in many areas of the market appear to have settled at a new level. However, the momentum remained varied depending on the region, property type and economic environment.

Stabilization after price collapse

  • Following the double-digit declines in 2023 – particularly for single-family homes and condominiums – the market proved more stable in 2024. Some experts speak of a bottom having been reached, although there were still no major price increases due to the economic conditions.
  • Urban vs. rural: While major cities such as Munich, Berlin and Hamburg remained stable due to sustained demand, rural regions and locations with less demand recorded further declines.

Factors influencing the price trend

  1. Interest rate trends: The persistently high mortgage interest rates had a strong impact on the willingness to buy. Many households decided not to buy due to the increased financing costs, which dampened demand.
  2. Decline in construction activity: Construction costs and interest charges led to a decline in new construction activity. This kept the supply of apartments and houses at a low level and counteracted a stronger price correction.
  3. Inflation and consumer behavior: Rising living costs affected the budgets of potential buyers and tenants, which further reinforced a cautious attitude on the market.

Regional differences

  • Urban centers: Prices remained largely stable in sought-after locations in large cities, as demand remained high despite higher financing costs. Rental apartments and smaller units were particularly in demand.
  • Weak regions: Price adjustments continued in structurally weak areas without significant population growth or infrastructure projects.

Outlook for 2025

The uncertainties surrounding interest rates, inflation and the economic environment are likely to continue to shape the market. As the FOCUS Group, we assume that the market will trend sideways overall in 2025, although further interest rate cuts could boost purchasing power again and the lower price for owner-occupiers and investors will certainly offer interesting entry opportunities. At the same time, the question remains as to whether the housing crisis and excess demand in cities will be able to adequately cover supply in the future.

Summary:
2024 was a year of consolidation on the residential real estate market. While prices stabilized in many places, the market remained fragile. For buyers and investors, the focus on location and location quality remains crucial, while high demand on the rental market continues to put pressure on supply.