By Indradip Ghosh
BENGALURU, March 6 (Reuters) – German home prices will rise about 3% a year through 2028, likely outpacing overall inflation and worsening affordability for first-time buyers while keeping rents high, according to property analysts polled by Reuters.
After the worst slump in decades, the housing market in Europe’s largest economy has recovered over the past year with prices up nearly 6% from an early 2024 trough.
Building permits, an early indicator of future construction activity, rose in 2025 for the first time in four years, suggesting the recovery will continue.
Average home prices will increase 3.3% in 2026, 3.0% in 2027 and 2028, according to 12 property analysts polled by Reuters between February 24 and March 5, an outlook largely unchanged from November.
That was despite expectations the European Central Bank will keep euro zone interest rates on hold at least for the rest of this year after a series of cuts that had supported the recent market recovery. However, the probability of a hike has risen due to potential inflation risks from the conflict in the Middle East.
“The market’s recovery is likely to continue but remains shaky. Consumers remain cautious given high levels of uncertainty both for geopolitics but also domestic policies, the rise in unemployment and slowing wage growth,” said Carsten Brzeski, global head of macroeconomics at ING.
“Affordability remains a concern. The risk is high the average age of first-time homebuyers will increase further.”
Ten out of 12 analysts expected properties would become less affordable for first-time buyers over the coming year.
A housing shortage is expected to keep exerting pressure on property prices and rents.
Just over 200,000 new homes are likely to be built this year, according to a spring report by real estate experts, much lower than required. A study commissioned by the German housing ministry last year suggested 320,000 new homes needed to be built each year by 2030 to meet existing demand.
Average urban home rents are expected to increase between 3.0% and 4.5% over the coming year, the poll showed, slightly outpacing home prices.
“Vacancy rates for apartments in some metropolitan areas are falling below 1%, while demand remains strong. In larger cities, only just over 50% of the required apartments are being completed,” said Benedikt Horwedel at LBBW. “A noticeable easing of the situation is not conceivable for several years.”
(Other stories from the Q1 global Reuters housing poll)
(Reporting by Indradip Ghosh; Polling by Debrah Gomes and Jaiganesh MaheshEditing by Tomasz Janowski)
