The German residential real estate market will remain challenging in the second half of 2026, albeit with considerable differences between individual market segments. While existing properties that have not been modernised in terms of energy efficiency can only find buyers at significant price discounts in some cases, smaller investment volumes as well as high-quality luxury properties continue to work well. Sotheby ́s International Realty is observing an increasing polarisation of the market.
“We are currently dealing with an extreme buyer’s market in many segments,” says Tobias Schulze of Sotheby ́s International Realty in North Rhine-Westphalia. “Houses that are not up to date in terms of energy efficiency and where buyers have to factor in considerable investments are particularly difficult. Here we can see in some cases that even prices at the level of the standard land values are no longer easily achieved. The ideas of sellers and buyers are often still significantly different.”
According to Schulze , there is a striking spread. On the one hand, properties with comparatively low purchase prices are in demand and, on the other hand, special properties in the high-priced segment. The situation in between is more difficult, especially when considerable modernization and energy costs are added to the purchase price. Nationwide, the price correction has not yet been completed.
“In the case of land, we are observing discounts of around 20 percent in some cases compared to previous price expectations,” says Olivier Peters of Sotheby ́s International Realty in Frankfurt am Main and Wiesbaden. “We are still in an adjustment phase. The transformation in the real estate market is far from over. At the same time, however, we see very clearly that individual segments are decoupling from the overall market.”
Luxury market proves robust
This is especially true for high-quality, new properties in very good locations. In the luxury segment from about three million euros upwards, demand is still there, according to Sotheby ́s International Realty. The decisive factors are quality, location, furnishings and a price in line with the market. “As good as new luxury is our core segment, and it is precisely this market that continues to function,” comments Peters. “Anyone who buys in this price range is not just looking for square meters, but for an extraordinary product. There is therefore still demand for really good properties.”
However, this does not mean that price expectations can be enforced regardless of the market. Buyers have also become more selective in the premium segment. Inflated asking prices lead to longer marketing times, while realistically priced properties find buyers. “The stock normalizes as soon as the property is correctly priced,” says Peters. “The decisive factor today is to determine the actual market value very precisely. In some cases, sellers are still guided by the maximum prices of previous years. Those days are over in many segments.”
Energetic condition becomes a price factor
The energetic condition of a property has a particularly strong impact on the purchase decision. Today, buyers no longer calculate with the purchase price alone, but take into account necessary investments in heating, insulation, windows and other energy-related measures when financing. Accordingly, these costs are directly included in the price negotiation. “A house with a considerable need to catch up in terms of energy is valued completely differently today than it was a few years ago,” explains Schulze. “Buyers calculate very precisely. If high six-figure sums have to be invested after the purchase, this must be reflected in the purchase price.”
For owners who want to sell in the foreseeable future and whose property is not in the upper luxury segment, it can therefore make sense to adjust their price expectations to the changed market conditions at an early stage. Waiting for a quick return to previous price levels is associated with risks.
Interest rates remain a factor of uncertainty
In addition, there is the further development of financing costs. Schulze does not expect buyers to be relieved in the short term by significantly more favourable financing conditions. On the contrary: “We have to expect that interest rates can rise again. Anyone who is counting on the situation to be resolved solely through cheaper financing should be careful.” Especially in the mid-price segment, the monthly burden is now more decisive for which property a buyer can afford. Rising financing costs thus also limit the scope for purchase prices.
More building permits do not solve the problem
Even the recent increase in the number of building permits is not yet a signal for a fundamental easing of the housing market, according to Sotheby’s International Realty. “Of course, every additional building permit is initially positive. But you must not forget what level we are coming from,” Schulze explains. “If the starting point is close to zero, percentage increases quickly look impressive. The decisive factor is how many apartments are actually built and completed.” High construction costs, financing costs and numerous insolvencies continue to weigh on the industry. Germany therefore needs not only more permits, but above all more housing construction that has actually been realized.
Sellers are increasingly looking for specialists
At the same time, the more demanding market situation is changing the requirements for marketing. The more special and high-quality a property is, the more important it is to have a realistic valuation, to specifically address suitable buyers and to have access to a supra-regional or international network. “A lot can be sold in a rising market. In a differentiated market, on the other hand, it becomes clear how important specialisation is,” says Peters. “Sellers of high-quality real estate today are very consciously looking for partners who know their segment, reach the right buyers and also have international access to potential buyers. A strong and globally known brand like Sotheby’s International Realty creates additional trust.”
Schulze and Peters therefore do not expect a uniform development of the German residential real estate market in the coming months. Rather, the spread is likely to continue. Existing properties with weak energy efficiency and properties with excessively high asking prices remain under pressure. Lower purchase prices and high-quality properties in very good locations, on the other hand, can continue to develop comparatively stably. “There is no single real estate market at the moment,” the two summarize. “Location, quality, energetic condition and, above all, the price are decisive. If these factors fit together, real estate will also find its buyers in this market.”
