The German property market is stabilising after turbulent years. Discover how you can succeed in 2025 with the right strategy and a sound evaluation of your investments. Take advantage of current opportunities for long-term wealth building.
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The topic briefly and concisely
The German real estate investment market stabilised in 2024 with a transaction volume of €34.9 billion and shows positive trends for 2025 with expected price increases of up to 3%.
A target return of 4-5% for rented properties is realistic, provided the rental price multiplier does not exceed 30.
Risk management through long-term interest rate commitment (10-15 years), reserves (approximately 3% of rent for defaults, €15/sqm for maintenance) and awareness of political factors is crucial.
Are you facing the decision to invest in real estate and wondering how to achieve the best results in 2025? The German real estate investment market showed initial signs of stabilization in 2024, with a transaction volume of 34.9 billion euros. Experts expect a slight recovery in prices of up to 3% in 2025, depending on the region, and increasing new contract rents by up to 5%. This article explores how you, as an heir, owner, or professional investor, can leverage current market conditions for your investments, minimize risks, and make data-driven decisions. A precise evaluation of your real estate investment is essential.
Market Overview 2024/2025: Stabilization and New Opportunities for Investments
Following declines of 40% (2022) and 56% (2023), the transaction volume in the German real estate investment market stabilised at €34.9 billion in 2024. This marks the first growth since the record year of 2021 with €113.8 billion. Experts predict a slight price increase of up to 3% for 2025, varying regionally. Germany's attractiveness as a real estate location is rated as "attractive" or "very attractive" by 72% of market participants, an increase from 58% in the previous year. Nevertheless, the situation remains challenging for project developers, with 96% expecting a difficult business environment. The demand for housing remains high, as highlighted by just around 175,800 building permits in 2024, far below the target of 400,000. This results in a nationwide vacancy rate of 2.5%, in major cities sometimes only 1%. Understanding these dynamics forms a solid foundation for investors.
This market development opens up new perspectives for smart investments, especially when regional differences and property types are analysed closely.
Return Potentials and Realistic Expectations in Real Estate Investments
A rented property as an investment should achieve a return of 4% to 5%. In certain regions, such as Freyung-Grafenau, net rental yields of around 4.3% with simultaneous projected value growth are possible. The average return for inner-city commercial properties is 3.76%, for logistics properties 4.25%, and for supermarkets 4.90%. When calculating, the rental price multiplier is an important indicator: it should generally not be higher than 30, meaning the purchase price should not exceed 30 times the annual net cold rent. For a successful investment strategy, it is crucial not only to focus on the gross yield but also to account for all costs and potential risks. The Auctoa AI-supported evaluation helps you create realistic income forecasts.
Precise analysis of the micro-location and the condition of the property is just as important for yield expectations as overarching market trends.
Risk Management: Avoid Common Pitfalls in Real Estate Investments
Investments in real estate are not without risks. A central issue is interest rate risk. Experts advise securing long-term interest rates for 10 to 15 years to protect against sudden rate increases. Additionally, plan for reserves to cover rental income shortfalls of approximately 3% of annual income and maintenance costs of about 15 euros per square metre annually, more for older properties. Political risks such as rent control regulations or stricter energy renovation obligations – properties must be climate neutral by 2045 – can also affect your returns. Careful examination of the property for hidden defects before purchase can prevent high subsequent costs. With the ImmoGPT chat from Auctoa, you can quickly address initial questions about potential risks.
The following points can help you minimise the most common risks:
Thorough credit check of potential tenants.
Signing of rental agreements with graduated rent or indexing, where permitted.
Establishing sufficient financial buffers for vacancies and repairs (at least 20% of equity as reserve).
Regular market observation regarding political and legal changes.
Obtaining an independent building survey before purchase.
Comprehensive due diligence is key to identifying these risks early and securing your investments.
The crucial role of property valuation for your investments
A comprehensive real estate valuation is essential for any successful investment. It reduces uncertainties and forms the basis for sound decisions regarding purchase, sale, or renovation. The cost of a professional appraisal in Germany ranges from €500 to €2,000, but can be higher for complex properties. There are various recognised methods, such as the comparative value, income value, and asset value approaches. The Discounted Cash Flow (DCF) method is particularly relevant for professional investors, as it enables accurate risk assessment and comparability with other asset classes. The choice of method depends on the type of property and the purpose of the valuation; the ImmowertV regulates the standardised application in Germany. A precise valuation by tools and experts is therefore indispensable. Auctoa offers AI-supported valuations that enable a quick and objective assessment.
The valuation takes into account numerous factors that significantly influence the value of your investment.
Key value drivers: location, condition, and sustainability of investment properties
The value of a property is determined by a myriad of factors. Location – both macro (region, city) and micro location (immediate surroundings, infrastructure) – is often the most important aspect. However, the structural condition, the quality of materials used, and the size of the land and building also play a significant role. Sustainability aspects are becoming increasingly important: High energy efficiency and low CO2 emissions can increase value, whereas a poor energy standard can lead to significant devaluations ("stranded assets"). Market developments and the overall economic situation also affect property values. For a detailed analysis of the value-influencing factors, you can rely on the expertise of Auctoa.
Consider these key factors when selecting your investment properties:
Economic strength and development potential of the region (macro location).
Connections to transport, supply, and social infrastructure (micro location).
Age, structural condition, and renovations carried out on the property.
Energy certificate and planned energy measures.
Flexibility of floor plans and alternative usage possibilities.
Current and projected demand for the property type at the location.
A careful analysis of these value drivers will help you to fully realise the potential of your investments.
Financing strategies and tax aspects for real estate investments
The right financing structure is a cornerstone of successful real estate investments. When it comes to income-producing properties, banks primarily assess the earning capacity (income value method). Unlike owner-occupied properties, a high equity share is not always advantageous, as interest costs can be deducted for tax purposes. However, at least the ancillary purchase costs should come from one's own funds; a buffer of 20% of equity for unforeseen expenses is advisable. Investors benefit from tax deductions (depreciation), typically 2% annually on acquisition and renovation costs. After a holding period of ten years, selling the property is generally tax-free. A well-thought-out investment advisory can help you find the optimal strategy. Speak to our experts at Auctoa to optimise your financing and tax options.
Long-term planning, incorporating all financial and tax aspects, ensures the success of your investments.
investments
The German property market will also offer interesting investment opportunities in 2025. However, it requires careful analysis and a strategic approach. The stabilisation of the market, combined with a continued high demand for housing and rising rents in many segments, creates potential for value-stable investments. Residential properties remain the focus of investors with 79% of mentions, followed by logistics properties with 47%. Key to success are accurate property valuation, active risk management, and consideration of sustainability aspects. Selecting the right location and property type, securing solid financing, and leveraging tax benefits are further building blocks for high-return investments. Use data-driven tools such as the Auctoa assessment and the ImmoGPT chat to make informed decisions and achieve your investment goals. Continuous market monitoring and adaptation of your strategy are essential.
Additional useful links
Das Statistische Bundesamt bietet detaillierte Daten zu Baupreisen, Immobilienpreisindizes, Hauspreisen und Bauland.
Die Deutsche Bundesbank veröffentlicht umfassende Finanzstabilitätsberichte.
The ifo Institute offers a press release on experts' expectations regarding significant price increases in real estate worldwide.
The KfW provides research findings on residential construction.
PwC offers the report "Emerging Trends in Real Estate 2025" with insights into current developments.
EY delivers insights into the real estate market, especially concerning shifts in sentiment amid geopolitical uncertainties.
FAQ
Is investing in real estate in Germany still worth it in 2025?
Yes, despite increased interest rates and construction costs, a real estate investment can still be worthwhile in 2025. The market is stabilising, demand for housing is high, and rents are rising. The key factors are careful selection, solid financing, and a realistic assessment.
How much equity do I need for a real estate investment?
It is recommended to cover at least the ancillary purchase costs (property transfer tax, notary, broker) with your own capital. Additionally, a buffer of about 20% of the equity for unforeseen expenses and maintenance is advisable.
Which locations are particularly attractive for real estate investments?
In addition to A-cities, B and C-cities with good infrastructure and positive demographic development can also be attractive. A detailed analysis of the micro and macro locations, as well as the specific local demand situation, is important.
How can Auctoa help me with my property investment?
Auctoa supports you with AI-powered property valuations for a quick and objective assessment. Our ImmoGPT chat answers initial questions, and our experts advise you on strategy, risk management, and the value enhancement potential of your investments.
What tax advantages are there for real estate investments?
Investors can claim interest costs, maintenance expenses, and depreciation (typically 2% per annum on acquisition/renovation costs) for tax purposes. A sale is usually tax-free after a holding period of ten years.
What is the difference between the real value method, the income value method, and the comparative value method?
The cost approach assesses the pure construction costs minus depreciation. The income approach focuses on future rental income. The sales comparison approach analyses sale prices of similar properties. The choice depends on the type of property and the valuation objective.
