Real estate: Experts expect rents and purchase prices to rise in 2025

Real estate experts also expect rents to rise significantly in the new year, especially in cities. The demand for living space in Germany remains unbroken, while too few new apartments are being built. Experts expect moderate increases in purchase prices following the recent price correction.

Sören Gröbel, director of research for residential real estate at Jones Lang LaSalle (JLL), does not expect new construction to gain significant momentum in 2025. “Many households have the desire to build new buildings, but the costs of craftsmen and materials remain high and the recent drop in interest rates is not big enough to offset the high construction and land costs.” Therefore, living space remains scarce and competitive, especially in cities – with consequences for rents.

Data from JLL for the dpa show strong rent increases in rural regions in the third quarter. Rents rose particularly sharply in metropolises and other large cities, increasing by around eight percent compared to the same period last year. This was followed by cities that serve as regional centers (plus around 4.5 percent). In other urban areas and in village areas, rents rose by around 4 percent. “Rents recently rose more sharply than in the previous real estate boom until 2022,” says Gröbel.

The situation is different when it comes to purchase prices. JLL sees only slight increases in most regions in the third quarter, similar to the Federal Statistical Office. “The real estate market is slowly picking up speed again, but for many people buying or building is still too expensive,” says Gröbel.

Only a tentative recovery in purchase prices is expected

The lower building interest rates make real estate loans cheaper. But the effect on real estate prices should not be overestimated, writes Peter Richter, analyst at Landesbank Helaba. In addition, the downward potential for building interest rates is no longer high, says Ulrich Kater, chief economist at Dekabank.