BNP Paribas Real Estate publishes market figures for Q3 2026
; the residential investment market continues its moderate recovery
The German residential investment market has remained robust overall up to the end of the third quarter of 2026. With an investment volume of €5.9 billion in residential portfolios comprising 30 or more units, the figure fell only slightly short of the previous year’s result (-5 per cent). Whilst the moderate market recovery seen so far this year has continued, albeit with slightly waning momentum, the broader economic conditions have recently taken a turn for the worse. Rising capital market yields, geopolitical uncertainties and a significant increase in supply in the core segment are putting pressure on pricing. Nevertheless, residential property remains the asset class with the highest turnover and continues to benefit from strong demand from institutional investors. This is the finding of an analysis by BNP Paribas Real Estate.
“After the first nine months of 2026, the residential investment volume stands at €5.9 billion. The moderate upturn in market activity at the start of the year continued as the year progressed, albeit at a slightly slower pace. At around €1.6 billion, the transaction volume in the third quarter was slightly lower than in the two previous quarters; furthermore, the frequency of deal closures has declined slightly. At the same time, market activity remains at a solid level,” explains Christoph Meszelinsky, Managing Director and Head of Residential Investment at BNP Paribas Real Estate GmbH. “Whilst four existing portfolios in the over €100 million segment were recorded in the second quarter, only one such portfolio – the Polarlicht portfolio – was recorded in the third quarter. At the same time, a high number of completed medium-sized existing portfolios contributed significantly to a transaction volume of around €860 million being achieved in this segment in the third quarter. This underlines the return of larger value-add transactions. The recent rise in capital market yields and increased geopolitical uncertainty have once again made pricing more difficult and led to more selective investor behaviour. In particular, investments in new-build projects are once again proving more challenging against the backdrop of higher yield requirements. However, due to the strong fundamentals of the residential market, demand for residential investments remains high.”
Medium-sized deals account for a disproportionately large share
Large transactions worth over €100 million continue to account for a significantly smaller share of the market volume – at around 35 per cent, or just under €2.1 billion – than the long-term average (10-year average: 52 per cent). At the same time, transactions in the mid-sized segment are the main drivers of market activity. In particular, transactions between €25 million and €50 million account for an above-average share of 25 per cent of the investment volume (10-year average: 16 per cent). At just under €1.5 billion, this size category also recorded its highest volume since 2022.
Existing portfolios dominate the market
Existing portfolios remain the mainstay of the residential investment market, accounting for 49 per cent – just under half – of the total volume. This means they remain slightly above their long-term average (10-year average: 47 per cent). Forward deals follow in second place with a market share of 22 per cent. Although this represents the second-highest share of all asset classes, the volume invested here – €1.3 billion – falls significantly short of the previous year’s figure of €1.9 billion. Nevertheless, modern new-build properties continue to enjoy above-average demand. At 15 per cent, this segment’s contribution to turnover is more than double the long-term average (10-year average: 7 per cent) and highlights the continued high appeal of modern residential properties to investors.
Well-capitalised investors are shaping market activity
On the buyer side, investment and asset managers continue to dominate, with a market share of 25 per cent. Equity/property funds account for the second-highest share, at 19 per cent. Together, these two groups account for just under 45 per cent of the total investment volume, underscoring the return of well-capitalised investors to the market. This picture is complemented by the sustained high level of activity from the public sector, which, with a market share of 14 per cent, also makes an above-average contribution to transaction volumes. A key factor here is the large number of forward deals in major German cities, which are being implemented primarily by municipal and state-owned housing associations to expand the supply of affordable housing.
Berlin remains the frontrunner, whilst B-class locations impress with their strong momentum
The A-class locations continue to account for around €2.2 billion, or just over a third of the total volume, and are thus roughly on a par with the previous year. Although Berlin remains the single market with the highest turnover at just under €950 million, it achieves a market share of only 16 per cent and thus lags significantly behind its long-term average. Hamburg recorded its best result since 2022, with around €440 million. At the same time, Leipzig and Dresden are showing strong growth: with €470 million and €330 million respectively, both locations achieved higher investment volumes than many A-class cities, whilst also posting their strongest results since 2022 and 2018 respectively.
Yields continue to rise in the third quarter
The trend in yields that began in the second quarter continued into the third quarter. Whilst net prime yields rose by a further 10 basis points across all ‘A’ locations, Berlin recorded the sharpest increase, with a rise of 15 basis points. This is attributable not only to the changed capital market conditions but also to the recent rise in uncertainty regarding the housing policy framework in the German capital. Munich remains Germany’s most expensive residential investment location, with a net prime yield of 3.60 per cent. It is followed by Berlin and Frankfurt (both 3.65 per cent), Hamburg (3.75 per cent), Stuttgart (3.80 per cent), as well as Düsseldorf (3.85 per cent) and Cologne (4.00 per cent). The continued adjustment in yields underlines the ongoing price discovery processes in the market.
Outlook
Following the stabilisation in transaction activity observed so far this year, the outlook for the German residential investment market remains fundamentally positive. Whilst the rise in capital market yields, geopolitical uncertainties and the associated increase in risk aversion amongst investors are likely to lead to more selective purchasing behaviour, they simultaneously underline the importance of crisis-resistant investment forms, of which the residential asset class continues to be a part. At the same time, supply has risen significantly, particularly in the core segment. This applies above all to completed new-build properties, which are increasingly competing for a limited number of potential buyers. As a result of higher yield requirements, transactions in the new-build segment are becoming more challenging again, and further adjustments to purchase prices in individual market segments cannot be ruled out.
“Residential property remains Germany’s highest-turnover asset class. The structurally high demand for housing, the number of new-build completions that remains low relative to housing needs, and stable rental markets continue to ensure strong interest from institutional investors. Against this backdrop, lively market activity is also expected in the final quarter, although investment activity is likely to focus more strongly on properties with strong fundamentals, stable cash flows and attractive potential for value appreciation. Furthermore, the well-stocked deal pipeline suggests that the segment of large-volume portfolio transactions will also provide further impetus until the end of the year,” says Christoph Meszelinsky, summarising the outlook.
