Economic Outlook

Prices for residential real estate in Germany rose significantly in the first quarter of 2025, particularly in several major cities. Despite ongoing economic and monetary policy uncertainties, the market for apartments, single-family homes and multi-family homes is gaining momentum.

The German economy will continue to tread water in 2025. In their spring report, the leading economic research institutes forecast an increase in gross domestic product of just 0.1 per cent for the current year. For 2026, the institutes expect gross domestic product to increase by 1.3 per cent. In the short term, the new US trade policy and economic policy uncertainty are weighing on the German economy. The additional scope for public debt should gradually have an expansionary effect, but threatens to crowd out private consumption and private investment.

In German cities, the price differences between city centers and outskirts are decreasing. The reason for this is that prices in city centers have recently fallen much more sharply in relative terms. During the boom years, central locations had benefited more than average. However, the price spread between the cheapest and most expensive neighborhoods in German cities remains very high. This is shown by the latest evaluation of the German Real Estate Index (GREIX) on property prices at neighborhod level in 2024. The GREIX is a joint project of the local expert committees for property values (Gutachterausschüsse für Grundstückswerte), ECONtribute and IfW Kiel based on notarized sales prices.