In the first half of 2026, the German residential investment market continues to show a selective, but at the same time stabilising market environment. The transaction volume reached 3.6 billion euros, around ten percent below the previous year. In the second quarter, however, a clear countermovement set in. The volume increased by around 17 percent compared to the first quarter and signals an increasing market recovery. These are the results of a recent analysis by the global real estate service provider CBRE.
At the same time, market activity has increased significantly. With 97 transactions, the number of trades was around eight percent higher than in the previous year and even around 76 percent above the level of the first half of 2023. This shows that the market approach is broadening again. However, some of the processes currently initiated have not yet been completed and are only likely to be reflected in transactions later in the year.
“The market is returning step by step. More investors are actively exploring opportunities and price expectations are converging again. This ensures more movement in the market,” says Stefan Wilke, Head of Residential Investment Germany at CBRE.
The average prime yield of the top 7 cities was around 3.4 percent at the end of the first half of the year and was largely stable year-on-year. “At the same time, the market expects a moderate expansion in the coming months. This expectation primarily reflects the changed interest rate environment, but is partially offset by high-quality products that are in high demand,” explains Wilke.
Cash flow and resilient business plans come into focus
Investors are more oriented towards stable income. The focus is shifting towards cash flow, while short-term exit strategies are becoming less important. Accordingly, the business plans will be calculated more realistically and geared more closely to sustainable rental income. In the case of potential new construction investments, this means that the sustainability of rental assumptions is questioned more critically. “Today, the quality of the current income is decisive. Investors are taking a closer look at how stable revenues are and how resilient the underlying assumptions are,” says Michael Schlatterer, Managing Director, Residential Valuation Germany at CBRE.
After a temporary standstill in May due to the rise in benchmark interest rates as a result of the geopolitical escalation in the Middle East, many transactions were restructured. Since June, activity has been increasing again. Nevertheless, the market remains selective. Core capital continues to act cautiously, while core-plus strategies are becoming more common again. Value-add capital remains in the market, but invests in a more disciplined manner.
Subsidized and affordable housing is gaining in importance
Subsidized and affordable housing has increasingly established itself as a central investment focus. Investors are specifically looking for segments with high predictability and stable earnings.
However, the pace of rental growth is slowing down somewhat. This applies in particular to new construction projects and locations outside the top locations. Rising construction and financing costs also limit the economic leeway. Classic value drivers are thus losing importance. Against this background, affordable housing is becoming more attractive. CBRE has also delved deeper into this topic in the white paper Affordable Housing as a Resilient Asset Class.
“Subsidized housing combines stability with predictability. In a more challenging market environment, it is precisely this combination that is becoming increasingly important for many investors,” says Jirka Stachen, Head of Research Consulting Continental Europe at CBRE.
The second half of the year is likely to be busier
The general conditions suggest further stabilisation in the course of the year. The recent decision of the Federal Government to exclude the nationalisation of private rental housing stocks by means of socialisation laws at the state level by means of a federal law also has a supporting effect. The project is expressly justified by the German government with the aim of strengthening private housing construction and improving investment conditions. Against this backdrop, regulatory and legal planning security for investors is likely to continue to increase. At the same time, numerous transaction processes for portfolios and individual properties offered on the market are already at an advanced stage, while the deal pipeline is growing continuously. There is therefore much to suggest that the current increase in market activity will increasingly materialise in actual trades in the coming months.
“Many processes have already been initiated. We expect these to be increasingly reflected in financial statements in the second half of the year,” says Stefan Wilke. “Against this background, a transaction volume of eight to nine billion euros still seems achievable for the year as a whole.”
