Real Estate Investment

The German real estate market has stabilized following the interest rate turnaround and is offering capital investors attractive entry opportunities again, according to the DAVE Real Estate Association market report for 2025/2026. After significant price declines in recent years, a trend reversal is becoming apparent.

Price levels and development forecasts

An apartment in Germany currently costs an average of 3,520 euros per square meter, according to figures from Dr. Klein. Single-family and two-family homes from existing stock average 3,009 euros per square meter. Engel & Völkers determined a higher average price of 4,251 euros per square meter for apartments in March 2026.

Dr. Klein expects a price increase of 3 percent for residential real estate in the overall German average for the full year 2026. Other leading institutes and banks forecast an average price increase between 3 and 4 percent. However, in February and March 2026, purchase prices for new construction homes, existing homes and apartments have fallen slightly again.

Yield prospects for capital investors

With solid residential real estate, net yields between 2.5 and 4 percent are realistic. A net yield refers to the actual return after deduction of all ongoing costs such as administration, maintenance and reserves, based on the capital employed.

Experts recommend at least 3.5 to 4 percent net rental yield, as higher values mean better profitability and less risk. A good net yield should exceed the current construction interest rate and additionally cover reserves and administrative costs. Higher yields are possible, but typically come with correspondingly higher risks.

Financing landscape is changing

According to a survey by EY, necessary refinancing remains a defining feature of the market: 95 percent of respondents see this as a central development for 2026. At the same time, private debt is gaining importance. 91 percent of surveyed market participants expect this form of financing to become increasingly important.

Private debt refers to external capital that is provided not through classic bank loans, but through specialized funds or institutional investors. This alternative financing option enables more flexible structures, but plays an important role in yield calculations through financing costs.

Sustainability becomes a standard criterion

For 2026, blockchain-based sustainability certificates and digital building passports are becoming standard. Investors are increasingly turning to impact investment – a strategy in which measurable ecological and social impacts take center stage alongside financial returns.

ESG criteria (Environmental, Social, Governance) are playing an increasingly important role in assessing real estate investments. Properties with poor energy efficiency or missing sustainability certificates are likely to lag behind in value development in the future.

Classification for investors

The stabilization of the market following the price declines of previous years offers entry opportunities. However, the forecasted price increases of 3 to 4 percent are significantly below growth rates before the interest rate turnaround. Investors must calculate with more moderate return expectations and should carefully weigh financing costs against achievable net rental yields.

Short-term price development in February and March 2026 shows slight declines, which puts the forecasts for the full year into perspective. Regional differences remain significant: while metropolitan areas tend to perform more stably, structurally weak regions continue to show price weaknesses.