Colliers’ new Housing Market Report 2026/2027 brings together the key developments in the German housing market, from demand and supply to the investment market, in an analysis. A key finding is that while residential construction continues to decline, demand pressure continues, especially in the large cities. Last year, only 206,600 apartments were completed, and Colliers expects a further decline of 10 percent to around 185,000 apartments in 2026. At the same time, the number of households in the 50 largest cities is expected to grow by around 408,400 by 2040. In the residential investment market, the transaction volume rose by 6 percent to 44.6 billion euros in 2025. In 2026, there will still be enough capital available for residential investments, but the price expectations of buyers and sellers are still divergent in many cases.
Demand remains high, residential construction continues to decline
At the end of 2025, around 83.5 million people lived in Germany, 0.1 percent less than in the previous year. The main reason was the significantly lower net immigration. However, this does little to change the long-term demand trends, especially in the metropolises. By 2040, an increase of around 408,400 households is expected for the 50 largest German cities. In the top 7 cities alone, around 291,900 households are to be added. The number of small one- and two-person households is growing at an above-average rate.
Francesca Boucard, Managing Director, Head of Market Intelligence & Foresight at Colliers, says: “The slight decline in population last year should not obscure the fact that the demand for housing in the big cities will remain high in the long term. The development of households is decisive. The growing number of small households in particular is encountering a continuing shortage of housing in the metropolises.”
New construction activity continued to decline in 2025. At 206,600 completed apartments, the completion volume was 18 percent below the previous year’s figure and at the lowest level in 13 years. A further decline of 10 percent to around 185,000 apartments is expected for 2026. A first positive signal comes from building permits, the number of which rose by 10 percent to 238,500 in 2025 for the first time in years. However, due to the long period between approval and completion, this is likely to be reflected in supply only with a significant delay.
“The increased number of permits is an important signal, but not yet a trend reversal in residential construction. The expected completion figures in the coming years are not sufficient for a noticeable expansion of the supply of housing. The existing excess demand cannot be significantly reduced for the time being,” explains Boucard.
Rental supply stabilizes, supply situation hardly eases
For the first time in several years, the supply of rental apartments has recently stabilized slightly. Nevertheless, living space remains scarce. In the top 7 cities, asking rents for existing apartments rose by 2.5 percent to an average of 16.75 euros per square meter within the past twelve months. Prime rents rose by 5 percent to 24.05 euros per square meter. In the 50 largest cities, average rents were recently 12.15 euros per square meter.
In the new construction segment, the rental trend was more moderate. In the top 7 cities, average asking rents remained largely stable. Overall, the rental momentum has thus weakened compared to previous years. However, due to the continued low level of new construction activity, Colliers expects further rent increases in existing and new buildings in the medium to long term.
At the same time, the changed household structure is strengthening the demand for alternative living concepts. With the growing number of small households, segments such as micro-living, student housing and serviced apartments in particular are gaining in importance. Alternative forms of living already account for more than 15 percent of the rental supply. As a result, alternative living is increasingly becoming an integral part of the German housing market.
Residential investment market grows, segments develop differently
In 2025, a total of 44.6 billion euros were turned over on the German residential investment market, 6 percent more than in the previous year. The development varied significantly depending on the market segment.
In 2025, the market for residential and commercial buildings, which is predominantly dominated by semi-institutional and private investors, grew significantly. The transaction volume rose by 13 percent to 35.5 billion euros across Germany. In the cities surveyed by Colliers, the number of purchase cases increased by 12 percent. Smaller properties were traded more frequently than in the previous year.
Florian Tack, Managing Director and Head of Residential Germany at Colliers, emphasizes: “Investors are once again increasingly taking advantage of attractive entry opportunities, but they are choosing very carefully. Today, the decisive factor is not so much the fundamental willingness to invest as the question of which properties are economically viable under the current financing conditions.”
The institutional residential investment segment developed differently in 2025. The transaction volume fell by 14 percent to 9.1 billion euros. Investors examined more closely, and there were also no large-volume portfolio transactions.
Financing conditions have tightened so far in 2026. Banks are acting more restrictively, and higher financing costs are making it more difficult to implement transactions. Yields on residential investments rose by an average of 25 to 30 basis points. For young existing properties (usually around 10 years old), the prime yield in the top 7 cities was 4.1 percent in mid-2026, and 4.8 percent in the other locations studied.
Capital interest remains high, price discovery shapes market activity
The new commitments show that capital is still available for German residential real estate: Since 2022, Colliers has recorded a total of around 8.4 billion euros for this purpose. A significant part of this comes from 2025 and 2026. For alternative living strategies aimed exclusively at Germany, around 4.5 billion euros will be added.
“Capital is available and interest in residential real estate remains high. Today, the challenge lies primarily in pricing between buyers and sellers. The current interest rate level is increasingly the new normal. Smaller ticket sizes are currently making it easier to conclude transactions. Alternative living is also gaining in importance and is establishing itself as an independent institutional investment segment,” explains Tack.
However, the ownership structure limits the choice for professional investors. Of a total of around 43.1 million apartments in Germany, only around 3.5 million or 8 percent are in the portfolio of private housing companies and other private companies. The majority belong to private individuals,
Homeowners’ associations or public owners. The size of the German housing market should therefore not be equated with the size of the investable housing market. For professional investors, only a comparatively small part of the total portfolio is available as an investment universe. At the same time, this structural shortage has a stabilising effect on the residential investment market.
However, the ownership structure limits the choice for professional investors. Of a total of around 43.1 million apartments in Germany, only around 3.5 million or 8 percent are in the portfolio of private-sector housing companies and other private-sector companies. The majority belong to private individuals, homeowners’ associations or public owners. This means that only a comparatively small part of the total housing stock is even suitable for professional investors. At the same time, this structural shortage has a stabilising effect on the residential investment market.
For 2026 and 2027, Colliers expects a transaction volume at the level of the past two years. The decisive factor for further market activity will be how the price expectations of buyers and sellers develop.
The full report is available for download here:
https://www.colliers.com/de-de/research/wohnungsmarkt-deutschland-2026-2027
