After a solid recovery in 2025, the German real estate market is losing momentum again. According to the Federal Statistical Office, housing prices increased by 3.2% over the year, approaching the pre-crisis level of 2022, but in the fourth quarter, quarterly growth slowed to a symbolic 0.1% compared to about 1% in the previous three quarters. ING analysts note that the annual dynamics conceal a clear weakening in demand amid deteriorating housing affordability and rising interest rates.
Mortgage lending, which grew by 37% year-on-year at the beginning of 2025, reached a 13% increase by the end of the year. This reflects not only the base effect, but also a real slowdown: wage growth has slowed, real estate prices have continued to rise, and the space for further reduction in loan rates has almost run out. As a result, households are increasingly delaying the purchase of housing.
The beginning of 2026 brought a new round of turbulence. In January, mortgage rates jumped to their highest levels since mid-2024, and the temporary decrease in financing costs in February proved short-lived.The escalation of the conflict in the Middle East has led to a jump in energy prices, an acceleration in inflation expectations and an increase in German government bond yields by more than 30 basis points since the end of February. As a result, mortgage rates may exceed 4% in the near future, which will further affect purchasing power. Against the background of increased uncertainty and expensive energy, households are more likely to save rather than invest in real estate. According to ING experts, the market recovery will face a temporary pause. However, the current situation should not be compared with the crisis of 2022, when the market was shocked by a rapid increase in interest rates from almost zero levels.Mortgage rates are already quite high now, and even a possible tightening of the European Central Bank's policy is largely embedded in the quotes. In addition, the structural imbalance between supply and demand persists: housing in Germany is still in short supply, which puts pressure on prices. And finally, if the energy crisis resolves, the country's economic recovery should gain momentum in the second half of the year.
Thus, analysts conclude that the German housing market is likely to sag under pressure, but it will not break. Stagnation is possible in the coming months, but experts do not predict a repeat of the collapse of 2022 with a sharp drop in prices and stalling transactions. The key factors will remain the dynamics of interest rates, energy prices and consumer confidence, but fundamental market conditions so far indicate a short-term correction, not a new round of crisis.
Source: Think
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