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The German residential investment market reached a transaction volume of 9.1 billion euros in 2025, which corresponds to a decline of 15 percent compared to the previous year. With the exception of the second quarter, all quarters of the year recorded almost the same transaction volume in the range of EUR 2.2 billion to EUR 2.5 billion.The reason for the decline in the overall market is that investors were more cautious and highly selective than expected. In addition, the market lacked large-volume portfolio transactions, which were traded significantly less than in the previous year. In 2025, for example, portfolios accounted for 3.6 billion euros (39 percent) of the traded capital (previous year: 5.7 billion euros or 53 percent), whose average purchase price per transaction was 56 million euros. In the previous year, the average purchase price per portfolio transaction was EUR 71 million.
Florian Tack, Head of Residential Germany at Colliers: "The demand for residential real estate continues to rise in all segments in general. The momentum weakened in the second half of the year, mainly due to the renewed rise in interest rates as a result of higher government bond yields following the announcement of the special fund by the German government. This dip, which was particularly evident in the summer months, could not be compensated for for the year as a whole. In addition, large portfolio holders in particular scaled back their portfolio sales efforts over the course of the year and instead made strategic realignments towards acquisitions. As a result, the available supply fell too much to achieve the expected annual result."
At -36 percent, the decline in transaction volume in the portfolio segment was significantly stronger than that of the market as a whole. Of a total of ten transactions with a volume of over EUR 100 million each, seven of the largest transactions were in the portfolio segment, while individual sales fortunately increased significantly by 20 percent year-on-year compared to the previous year. A transaction volume of 5.5 billion euros was registered here (previous year: 4.6 billion euros).
With the Germany-wide portfolio of 8,000 apartments from the open-ended real estate fund UniImmo Wohnen by ZBI / Union Investment to In-West Partners / I-Wohnen Group for 750 million euros and a portfolio in northern and western Germany with a volume of 500 million euros (3,300 apartments) by ZBI / Union Investment to Net Zero Properties S.A. / ZAR Investment, the two largest sales of the year took place in the first half of the year. The third-largest deal was registered in the third quarter with the sale of the Marienhöfe district (880 apartments) in Berlin as forward funding to Hines' European Core Fund (HECF) for 425 million euros.
Tack: "Transactions were characterized by long lead times, very detailed due diligence processes and a higher susceptibility to cancellation, so that transaction security decreased in the course of 2025. However, it is extremely positive to note that the market regained momentum at the end of the year. The year-end quarter was the strongest of 2025 with 2.5 billion euros, accountable for 121 transactions (previous quarters between 82 and 93 transactions)."
Structurally, the market in 2025 was supported by existing properties, as in the previous year. These, especially those of a younger age with a core character, once again formed the foundation of investment activity in 2025. New construction properties and project developments accounted for a total of around EUR 3.2 billion (34 percent) of the transaction volume. Here, investors continued to be cautious despite a more predictable financing environment, also because the largest discrepancies between sellers and buyers in price discovery continue to exist in this segment. Forward deals and projects remain investable in principle, but due to financing, cost structures and price discovery, they have not yet reached the level of activity that would be possible from a demand perspective.
On the buyer side, asset managers, asset & fund managers (25 percent) and private capital (17 percent) were the most active in terms of transaction volume, while the seller side was dominated by project developers (25 percent) and funds (13 percent) as well as housing companies and companies (12 percent).
In terms of ticket sizes, sales of up to 50 million euros dominated the residential investment market, which accounted for 4.7 billion euros or 52 percent of the total market, after 37 percent in the previous year. The segment of 50 to 100 million euros was also able to increase its share, which rose from 12 percent in the previous year to 19 percent in 2025. In contrast, the share of invested capital traded in tickets over 100 million euros fell to 29 percent (previous year: 48 percent).
In 2025, 35 percent of the investment volume (3.2 billion euros) was accounted for by the top 7 cities, the same as in the previous year. The other locations accounted for 65 percent or 5.9 billion euros. Berlin confirmed its top position with 1.4 billion euros despite a significant decline (previous year: 2.8 billion), ahead of Munich with 567 million euros, despite a significant decline (previous year: 2.8 billion). With the exception of Stuttgart, where almost no market activity was seen, all other top 7 cities are very balanced with transaction volumes in the range of 260 to 345 million euros. With the exception of Cologne, all locations thus showed a transaction volume that was significantly higher than in the previous year.
Francesca Boucard, Head of Market Intelligence & Foresight at Colliers: "Returns remained stable over the course of 2025. For young existing properties, prime yields in the top 7 cities are 3.85 percent, in other locations 4.50 percent. Yields are expected to remain the same in 2026. In the case of high-quality existing properties of a younger construction age with a core character in established locations and good locations, a slight decline in yields is possible in the course of 2026 due to the expected high demand, while yields on the property types of new buildings, projects, forward deals and older existing properties will remain stable."
New rental rents for existing properties are rising steadily, new rents volatile
The rental momentum of previous years continued in 2025, but with clear differences between existing and new-build properties. In the top 7 cities, rents for existing apartments for re-letting rose by around 5 percent in the past 12 months, slightly more than in the previous year, when an increase of 4 percent was recorded. In the new construction segment, the growth in new rental rents was significantly lower at 0.5 percent. Rent increases showed high volatility over the course of the year. While a downward trend was observed in the first half of 2025, due to a lower supply of expensive locations, there were significant rent increases again from the middle of the year, which made up for the correction of the first half of the year. For 2026, in view of the continuing severe shortage of supply and the further decline in the number of new buildings, a further increase in rents in all segments and locations is expected in the range of the growth rates of previous years of up to 5 percent.
Even though the annual result on the residential investment market was weaker than expected, the current very positive real estate climate underlines the special position of the residential segment compared to all other types of use. The positive real estate climate is considered a reliable indicator of the overarching expectations in the market and confirms the high attractiveness of residential real estate as an asset class.
Tack: "Demand for residential investments will remain high in 2026, but will develop in a differentiated manner according to property types. Demand for forward deals and projects will increase over the course of the year, while existing properties with a young construction age will continue to be the most sought-after as core investments. Older, non-ESG-compliant portfolios will not experience any noticeable changes on the demand side, while micro-living will experience a noticeable demand impulse. Investors see the opportunities for an early cyclical recovery in 2026 and are positioning themselves, but will continue to act selectively and set clear requirements for property quality, location and cash flow. The supply side will improve and investment products will be available in sufficient quantities. The corrected price level, which has not yet risen again across the board, currently makes the market extremely attractive. Competition for products will increase and we expect a transaction volume in the range of 9 to 10 billion euros in the range of the past two years in 2026."
