The size of Germany’s economy and population position it as one of the major European real estate markets. Nevertheless, the market has
, with the 12-month value of real estate investments dropping to 29 billion euros in January 2024. Among the different property types, residential attracted the most capital. The declining investment sentiment is also visible in the housing construction industry. In 2023, the revenues of the residential real estate construction industry
. One of the challenges the German real estate industry faces is reducing its reliance on carbon fuels. According to investors, the price differentiation between properties with different levels of sustainability
Residential real estate market
Germany’s homeownership rate is just under 50 percent, making it
the lowest in Europe after Switzerland. As a result, renting is very common: Over half of German households
live in apartments. The housing market enjoyed steady growth for over a decade, but in 2022, the market cooled, and
prices fell. One of the main reasons for the market decline is the
soaring mortgage interest rates, causing many prospective homebuyers to cancel or pause their plans to buy a house. Conversely, demand for rental properties remains high. The rental index amounted to 105.2 index points in 2023, reflecting an increase in rents
of over five percent since 2020, the index baseline year.
Which are the most profitable commercial property types?
In Germany, shopping center investments fetched a prime yield of 5.5 percent in 2023 -
higher than any other property type. Yield measures profitability and shows the annual rent as a share of the property price. Higher yields suggest higher profitability, but that often comes with additional risk. Rental apartments, for example, had the lowest prime yield but were considered
the most popular property type among investors. Offices and logistics real estate were other sought-after property types.
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