Aengevelt Research has been publishing the AWI index since 2008 as a qualified scientific guide to the residential investment market. It regularly collects the assessments of experts from all areas of the housing industry, who together represent a high six-digit number of residential units in all parts of Germany, on market sentiments and developments.
After the AWI achieved 47.9 points in the 2022/2023 winter survey, the worst result since the beginning of the survey, its value rose again afterwards.
This trend continued in the 2024/2025 winter survey, with an increase of 3.4 points to 69.9 points (summer 2024: 66.5). The increase took place across all residential areas:
- In the simple locations, the AWI recorded the highest increase of 3.6 points to currently 65 (summer 2024: 61.4). The middle locations rose by 3.4 points to 72.1 points, and the good locations rose by 3 points to 74.5 points.
- Thus, all three sub-indices indicate an imbalance in favor of the owners or landlords (market equilibrium: 40 – 60 points).
The continuing rise in the values of the AWI and the increase in transaction activity in the residential investment segment, especially in the second half of 2024, reflect the attractiveness of this asset class. On the other hand, in view of the further decline in the number of permits, among other things, there are no signs of a turnaround in residential building completions so far, so that market-oriented, affordable housing remains scarce, especially in the growth cores, with the consequence of a further increase in rents. That is why a balanced, clear political change of course must now take place in order to unleash the overdue sustainable growth spurt.
Rental housing market
The current survey results confirm this assessment:
- None of the respondents expects rents to fall (summer 2024: 1.4%).
- By contrast, the proportion of survey participants who expect rents to rise is almost unchanged at 78% (summer 2024: 79%). In simple residential areas, 73% (-1 percentage point), 79% (-5 percentage points) in medium-sized areas and 82% (+2 percentage points) in good residential areas.
New residential construction and renovation
- The lower investments in the construction of new rental apartments also contribute to this. In the opinion of the survey participants, however, this will not change in the short term. In fact, only 6% of respondents continue to expect an increase in investments here (summer 2024: 9%). In contrast, 60% expect a decrease in investment in new construction. In the summer of 2024, however, it was still 70%, and in the winter of 2023/24 even 79%.
- The importance of modernising or refurbishing housing stocks must be viewed in a differentiated way in the current survey: only 26% (summer 2024: 21%) of respondents expect increasing investment in modernisation and repair measures. With regard to increasing investments in energy-efficient building renovation, the figure is 42% (summer 2024: 47%).
Residential investments: AII continues to recover.
In terms of expectations for the capital value development of residential investments, the AII (AENGEVELT-I nvestment-I ndex) achieved the highest value to date in the 2021 summer survey with 77.8 points. After that, it fell steadily until it reached a historic low of 23.2 points in the summer of 2023.
In the winter of 2023/24, a slight recovery of 28.2 points began, which continued in the summer 2024 survey with an increase to 46 points. In the 2024/2025 winter survey , the value also rose again to 54.9 points , confirming the recovery tendencies, even if this value remains well below the peak value.
- The AII sub-index rose most sharply in simple locations, namely by 9.5 points to 48.8. In medium locations, the AII also rose significantly by 8.8 points to currently 56.9 . The good locations also recorded an increase, by 7.9 points to currently 62.8.
- Across all location categories, an increasing proportion (36%) expects demand for residential investments to increase (summer 2024: 24%; winter 2023/2024: 12%). As in the summer of 2024, 21% expect demand to decline. In the winter of 2023/24, the figure was still 56% and in the summer of 2023 it was as high as 67%.
- Accordingly, a further growing proportion of survey participants ( 38%) predicts rising prices for residential investments (summer 2024: 26%; Winter 2023/24: 9%; Summer 2023: 7%)). Similarly, the proportion of those who expect prices to fall will fall to 17% (summer 2024: 29%; Winter 2023/2024: 57%; summer 2023: 69%).
Result.
- The AWI has risen for the fourth time in a row in the 2024/2025 winter survey. This speaks for an increasingly sustainable trend reversal. However, further development depends on various factors. These include the development of inflation and interest rates on loans, the national and global economic situation, regulatory requirements for new residential construction, etc. In general, there are signs of a further growth in interest in residential investments, and the pricing phase is also progressing. Against this background, it can be assumed that the revival and dynamisation of market activity, which began in the second half of 2024, will continue in 2025. According to Aengevelt’s observations, in addition to sustainable new residential construction, existing properties with previously suboptimal energy standards in preferred locations are also being examined – albeit with clear expectations of correspondingly significant price reductions and high value appreciation potential through comprehensive renovation as well as corresponding funding opportunities.
- The outlook for tenants is less favourable, especially in growth regions: persistently declining building permits and completion figures do not mean that the housing market is expected to ease in the medium term. Accordingly, a further increase in the rent level can be expected in tense housing markets. In addition, there is a rent cost burden that is still well above average, especially for lower-income households. Here, too, no easing is to be expected in the short and medium term. On the contrary, this situation is exacerbated by the significant increase in property tax for residential real estate in many locations, which can be passed on 100% to tenants and will certainly be in the vast majority of cases.
