German property prices rose by 4.0% in 2025, according to a recent report by the Association of German Pfandbrief Banks (vdp), marking a continuation of the recovery seen in 2024. The vdp index reached 185.6 points at the end of the year, with price increases recorded in all four quarters, culminating in a 1.0% rise from the third to the fourth quarter.
The increase builds on a 1.8% gain recorded in 2024, signaling a rebound from the market slowdown experienced in 2023. That prior year saw rising interest rates and energy costs contribute to price declines, with some sellers accepting discounts of up to 40%, according to industry observers.
While the overall increase was 4.0%, residential properties saw a more significant jump, increasing by 4.2% over the year. Commercial properties, encompassing office and retail spaces, rose by 3.5% during the same period. Both residential and commercial properties saw similar gains between the third and fourth quarters, with increases of 1.0% and 0.9% respectively.
Jens Tolckmitt, Chief Executive of the vdp, stated that the market “has continued its recovery phase in 2025. Prices are rising steadily, but less dynamically than in the low-interest rate phase.”
The vdp’s Immobilienpreisindex is based on actual transaction data from over 700 credit institutions, providing a comprehensive view of the German property market. VdpResearch has been collecting this data quarterly since 2010, covering residential, office and retail properties.
Despite the positive trend, a shortage of housing continues to be a key driver of price increases. The Zentraler Immobilien Ausschuss (Central Real Estate Committee) forecasts approximately 215,000 new housing units will be completed in 2026, a figure considered insufficient to address the existing housing gap. Michael Mühmann, a Munich-based real estate expert, estimates Germany needs around 700,000 new homes annually to meet demand.
The vdp is likewise advocating for the inclusion of Pfandbriefe in the positive list for investment contracts (AltZertG), and is pushing for the simplification and risk-oriented treatment of securitizations within the ongoing revision of relevant regulations. The association has raised concerns that capital requirements for banks may hinder investment in the climate-neutral transformation of the economy, potentially blocking billions in necessary funding.
