In Germany, the gap between the rental market and the home purchase market is widening. According to Reuters, citing the IW Housing Index, rents under new lease agreements increased by 3.5% year-on-year in Q1 2026 and by 0.6% compared with the previous quarter. At the same time, purchase prices for apartments and houses remained almost unchanged, with both segments rising by only 0.1% quarter-on-quarter.

📊 This dynamic shows that pressure on tenants remains high, while the buyer market is still more cautious. After a period of high interest rates and reduced mortgage affordability, purchase prices have stabilized, but rental demand continues to support rent growth.

📍 The most noticeable rent increases were recorded not only in Germany’s largest cities, but also in suburban areas around major metropolitan regions. According to the study, rents in the suburbs of Germany’s largest urban areas rose by 4.2% year-on-year, while rents in other large cities increased by 3.8%. Among major cities, the strongest growth was recorded in:

— Düsseldorf: +5.9% year-on-year;
— Cologne: +5.7%;
— Hamburg: +5.1%.

📉 Berlin, however, showed the opposite trend: rents under new lease agreements fell by 0.8% year-on-year. This makes the German market uneven. In some cities, rents continue to rise rapidly, while in others growth is slowing or turning into a correction.

🏡 The purchase market looks calmer. In annual terms, apartment prices increased by 2.5%, while prices for one- and two-family houses rose by only 0.7%. Among Germany’s 10 largest cities, purchase prices increased the most in Cologne, where growth reached 5.1%. It was followed by Frankfurt with 3.9% growth and Essen with 3.6%. At the same time, Stuttgart recorded a decline of 2.1%, while Munich fell by 0.3%.

📈 When rents rise faster than purchase prices, the potential yield of properties may improve. This does not mean that profitability will automatically increase across the entire market, but the market logic becomes clearer: rental demand remains strong, while entry prices for buyers have not yet shown a sharp jump.

🏗 The main reason for this situation is limited housing supply. According to the Kiel Institute, in Q1 2026 the number of standard rental listings across 37 German cities and regions declined by another 0.6% quarter-on-quarter. In 2025, there were around 250,000 such listings, compared with approximately 260,000 a year earlier. Since 2015, their number has fallen by about 22%.

📌 Overall, Germany’s housing purchase market has stabilized, while rents continue to rise. This creates a situation in which real estate in cities with stable rental demand may remain attractive for long-term investors.

🔎 You can explore available properties in Germany for living or investment on our website.