The growth of real estate prices in Germany continued in the second quarter of 2025: the real estate price index of the Association of German Real Estate Banks (vdp) increased by 3.9% year-on-year to 182.4 points. Compared to the first quarter of this year, the growth was 1.0%.
The data underlying the VDP index has been collected by vdpResearch on a quarterly basis since 2010. They cover the price dynamics of the entire German residential, office and retail real estate market and, unlike other price indices, are based on an assessment of real estate transaction data from more than 700 financial institutions.
As in previous quarters, residential property prices were the main driver of price growth in the second quarter. They grew by an average of 4.1% compared to the same quarter of the previous year and by 1.1% compared to the previous quarter. The increase in prices for commercial real estate, including office and retail premises, was also significant, but slightly lower: 2.9% year-on-year and 1.0% quarter-on-quarter.
"The recovery phase in the real estate market continues," said Jens Tolkmitt, Managing Director of VDP. "Real estate prices have been rising for the fifth consecutive quarter, and residential property prices continue to be the driving force behind this growth. The rise in residential property prices has intensified again, which is obviously due to the extremely tense situation in the housing market." While construction volumes have decreased significantly recently, more and more potential buyers are showing interest in the few residential properties available on the market, further fueling price increases.
Residential real estate: a surge in prices for apartment buildings
The overall 4.1% year-on-year increase in residential property prices was driven, in particular, by the dynamics of prices for apartment buildings, which increased by 5.6% during this period compared to the second quarter of 2024. The cost of owner-occupied residential properties, including single-family homes and condominiums, increased by 2.6% year-on-year. A similar pattern was observed compared to the previous quarter: the increase in prices for apartment buildings amounted to 1.3%, which is significantly higher than the increase in prices for owner-occupied residential real estate (0.8%).
The worsening housing shortage has also led to a further increase in rents for new housing in apartment buildings in the second quarter of 2025. However, the growth was 3.5% year-on-year, which is slightly less dynamic than in the previous quarter (4.3%). Rental yields, as measured by the VDP real Estate Yield index, decreased by 1.9% year-on-year, as a result of slower rent growth compared to price dynamics.
The housing construction stimulus approved by the new federal government is an important first step. However, building new housing takes time. Therefore, the housing shortage will persist for at least several years, and housing prices and rents will continue to rise.
Residential property prices in the seven largest cities increased even more in the second quarter of this year than in Germany as a whole: in Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart, the average increase in residential property prices was 5.5% compared to the same quarter of the previous year. The sharpest price increases were observed in Munich and Frankfurt am Main - by 6.5% and 6.4%, respectively. The smallest year-on-year growth was recorded in Stuttgart (3.0%).
Compared to the previous quarter, the largest growth among the seven largest cities was recorded in Dusseldorf (2.0%) and Frankfurt am Main (1.7%). On average, residential property prices in the seven largest cities increased by 1.5% between the first and second quarters of this year.
The housing shortage in Germany and the associated increase in rents were particularly noticeable in large cities: rents for new housing in the seven largest metropolitan areas increased by an average of 4.3% compared to the same quarter of the previous year. In Dusseldorf and Frankfurt am Main, rents increased by 5.0% and 4.9%, respectively, while in Cologne and Stuttgart, the growth was the lowest– by 3.6% and 3.4%, respectively. Yields measured by the VDP real estate index decreased by an average of 1.6% in the seven largest cities, ranging from -2.4% (Cologne) to +0.1% (Stuttgart).
Commercial real estate: prices and rents are rising synchronously
The 2.9% increase in commercial real estate prices compared to the second quarter of 2024 was driven by higher prices for both office (3.3%) and retail real estate (2.0%). Compared to the first quarter of 2025, office real estate prices also increased more — by 1.1% than retail (0.6%), which led to a quarterly increase in commercial real estate prices by 1.0%.
Rents for new commercial real estate transactions moved similarly to prices: while rents for office real estate increased by an average of 3.5% per year, rents for commercial real estate increased less by 2.1%. The yield calculated by the VDP real estate interest rate index increased by 0.3% year-on-year for offices and 0.2% for retail real estate. Quarterly profitability decreased by 0.1% for offices and 0.2% for retail real estate.
"Commercial real estate prices have stabilized over several quarters and are now showing growth again," Tolkmitt commented. Nevertheless, the commercial real estate market is not as stable as the residential real estate market, as evidenced, for example, by the continued low number of transactions. Until now, the market has been heavily focused on energy efficient commercial real estate in prestigious areas. The unrepaired economy, ongoing trade conflicts and geopolitical crises continue to create potential pressures and uncertainties for the commercial real estate market.
About the VDP Real Estate Price Index
The Association of German Real Estate Banks (VDP) publishes quarterly rent and price indices reflecting the dynamics of the residential and commercial real estate market based on data on completed transactions. The index, compiled by the research company vdpResearch, is part of the Deutsche Bundesbank real estate price monitoring program. It is based on transaction data (actual realized purchase prices and rents) provided by more than 700 credit institutions in the German financial sector in relation to their real estate financing activities.
