German residential investment market 2025: trending up at the end of the year
- Q4 transaction volume totalling € 2.9 billion - the strongest quarter of the year in terms of
turnover - Total volume recorded at 7.8 billion euros in 2025
- Investors focusing on core and core+ products and established investment locations
- Further rent and price increases
In the fourth quarter of 2025, the German residential investment market recorded a transaction volume of €2.9 billion. While this is the highest quarterly figure of the year, it stands a fourth below the comparable figure for the previous year. In total, this results in a volume of EUR 7.8 billion for 2025 as – which is around 9% less than in the previous year. "The summer months of the year were characterised by low investment momentum, which contributed significantly to the surprisingly low transaction volume," as Mark Holz, Head of Strategy and Research at Lübke Kelber, commented on
the result.
"Investment demand was very focussed this year: Investors concentrated on strong locations and low-risk products," Holz went on to add. Around 54% of the transaction volume is attributable to the 14 most relevant investment locations, which are considered A-markets according to Lübke Kelber's definition. B and C cities accounted for an additional 33 % in total.
Moreover, in the course of the year, the investment focus also shifted to lower-risk market segments. The fourth quarter in particular was dominated by a high proportion of core and core+ investments, while larger portfolio transactions in the value-add segment, such as the acquisition of 1,600 residential units by Greykite and Arax properties, remained less relevant.
Individual volumes also remain moderate: Over the course of the year as a whole, transactions weighing in at a volume of more than EUR 100 million were rare. With a look to the fourth quarter, Lübke Kelber identified only five such cases, with the purchase of the Marienhöfe district in Berlin by Hines for its European Core Fund (HECF), structured as a forward, representing the largest transaction of the quarter.
Amounting to a share of 37% of all purchases, transactions with a volume of between € 10 million and € 25 million form the dominant segment, followed by € 25 million to € 50 million accounting for just under 33%. The share of core investments is very high, particularly in this area of individual transactions and smaller portfolios.
Broad range of buyers and deals
The picture of active buyer and seller profiles remained very mixed in the fourth quarter. Family offices continued feature as active group of buyers - particularly in the EUR 10 million to EUR 30 million range. Institutional investors and investment managers are also increasingly returning to the market. In addition to the afore mentioned example of the Marienhöfe, Tishman Speyer's purchase in Freiburg, also as forward funding, and further acquisitions by Catella, Aachener Grund and HIH Invest also fall into this category. On the side of listed real estate companies, Vonovia was the buyer of 750 residential units in Cologne and northern Germany at the end of 2025, while Peach Property announced the sale of 2,000 residential units, also at the end of 2025.
Pricing: Diverse developments in yields and factors
In the fourth quarter, the average price per square metre from all transactions was just over EUR 4,000 – and significantly higher than in previous quarters. This does not necessarily reflect an increase in prices, but primarily pertains to the type of property that was traded: In addition to concentrating on the Core and Core+ segments, the focus was on higher-priced cities such as Munich and Berlin.
However, Lübke Kelber also identifies a price increase at overall market level. This is based on both a broad rise in rents and a movement in pricing - i.e. increasing factors and declining initial yields.
Existing residential rents, i.e. excluding new builds, rose without exception in the 135 markets analysed in detail by Lübke Kelber: by 4.8 % at the median of all markets and by 8.6 % at the peak, recorded in Fürth. Leipzig was notable once again as the fastest-growing A-market, where median rents were up by 7.3%, while growth in Berlin was the lowest in the A-markets at 2.5%.
The development of the purchase factors showed a more differentated picture. Lübke Kelber has observed an increase in purchase factors in the historically strong economic centres and individual swarm cities, while factors in structurally weak locations remain under pressure.
Transaction market Germany
The environment and outlook for the residential property investment market remains
multifaceted
Despite the ECB's four interest rate hikes over the course of 2025, financing costs for residential property remained largely stable. In fact, the yield on the 10-year German government bond, has developed in the opposite direction – rising over the course of the year from 2.37 % at the beginning of January to 2.85 % at the end of December. Global debt trends, inflation and the economic growth outlook are responsible for this development. This means that while the interest rate environment has not improved in 2025, the general situation has been much more predictable for investors by comparison with previous years. A largely stable trend is anticipated for the coming year without interest rate hikes by the ECB.
Germany's economic development was once again sluggish in 2025. GDP growth in the first three quarters was close to stagnation. Analysts do not expect strong growth in 2026 either. The development of recent years is also increasingly reflected in the labour market. As of November, the unemployment rate stood at 6.1%, marking an increase of 0.2 percentage points or 111,000 people compared to the previous year. If this trend continues, it may limit the potential for rent rises over the medium term.
Due to the continuing significant supply-demand imbalance in the residential market, rents are expected to continue to rise across the board in the coming years. In some metropolises, however, rent levels and the rent burden are so high that rent increases are to be expected especially in attractive and more affordable second and third-tier cities. The German residential property market therefore remains fundamentally attractive from an investment perspective. The uncertain global geopolitical environment should also continue to have a positive repercussion on investment demand in Germany. In uncertain times, capital tends to look for safe investments, which include residential property, especially in Germany. Consequently, Lübke Kelber expects the overall transaction volume of residential property in Germany to increase significantly to over EUR 10 billion this year.
Methodology
The analysis of the transaction volume includes all properties used for residential purposes that comprise at least 20 residential units and in which commercial uses only play a subordinate role. In addition, minority interests and pure M&A transactions or entity deals are not taken into account. Special forms of housing, such as student accommodation or retirement homes, are also not included in the analysis. The factor analysis relates to medium to good buildings typical of the market, without significant underrent and without significant capex requirements. The A, B and C market typology follows the Lübke Kelber definition.