Residential Investments in Germany – December 2025

Dear Readers,

The residential investment market is taking clearer shape. While other sectors of the economy are contracting, residential real estate is seeing rising sales and growing transaction volumes across most cities. Berlin remains by far Germany’s largest investment market. Political risks are well-known and priced in, and those who understand the market’s framework can find numerous attractive opportunities to (re-)enter the German capital.

At the same time, it is becoming clear how strongly the market is now driven by structural forces. The energy transition is placing existing buildings under the spotlight, while modular construction and on-site renewable energy generation are making modernisation far more predictable than just a few years ago. Interestingly, the political interventions often perceived as risks are, in many segments, providing the reliability investors require: tight supply, stable demand, and clearly defined strategies for different submarkets.

The result is a market shaped less by volatility and more by redefined structural conditions. Those who understand the logic of this environment will recognise that opportunities arise not alongside challenges, but from them.

We wish you an insightful read.

Yours,
Jürgen Michael Schick and Holger Friedrichs

Unlocking the Energy Potential of Existing Residential Buildings

Germany’s building stock possesses a vast energy potential that has so far only been partially exploited. Multi-family housing, in particular, should be at the heart of the energy transition. These buildings combine extensive roof areas, stable load profiles, and a high concentration of consumers on a single connection point – a combination that makes them one of the most effective levers for delivering secure and affordable energy. Increasingly, studies are confirming this. For example, analysis by IW Medien GmbH, carried out as part of the Ariadne project, indicates that more than 20 million apartments could, in technical terms, be supplied through residential on-site solar schemes. On paper, this would cover a significant share of the required photovoltaic expansion.

Current conditions are favourable. Photovoltaic systems installed on residential buildings can provide a substantial proportion of annual electricity demand directly on site, relieving pressure on the grid and reducing costs. Their load profile aligns well with modern energy systems, particularly when combined with heat pumps, EV charging infrastructure and, in future, electricity storage. The advantage of such systems is clear: electricity is generated where it is needed. This eliminates grid fees, transmission-related costs, and exposure to price volatility. For tenants, it translates into lower service charges; for owners, stable returns; and for the wider energy system, a reliable source of decentralised generation.

Roofs as Strategic Resources for the Energy Transition
Despite these favourable conditions, progress in expanding rooftop solar has been slow. This is due less to a lack of willingness among property owners than to bureaucratic and technical hurdles that complicate the adoption process. Many landlords are deterred by metering concepts, billing processes, and coordination with grid operators. Yet proven solutions already exist. Residential on-site solar schemes are currently the most practical approach for making PV systems economically viable in existing buildings. Under this model, specialist service providers manage the technical operation, energy management, billing, metering, and customer service. Tenants have a single contract covering both on-site solar electricity and any required top-up power from the grid, while property owners are primarily responsible for providing the roof space and deciding whether to invest directly or use a contracting arrangement.

Roofs offer ideal conditions for such solutions. According to Fraunhofer ISE, Germany’s rooftop surfaces have a potential of several hundred gigawatts. Even today, more than three million systems already generate a considerable share of the country’s solar electricity. Experience shows that rooftop projects can be implemented quickly, whether owners invest themselves or use leasing or contracting models. For commercial properties, onsite power purchase agreements (PPAs) provide an additional route, supplying electricity directly on the premises. Recent regulatory clarifications on the distinction between customer energy networks and private direct supply lines have increased legal certainty in this area. For residential buildings, shared building electricity supply schemes simplify internal power distribution, though they do not offer the full economic benefits of a comprehensive residential on-site solar scheme model.

Economical Deployment of Photovoltaics on Roofs
Another area with significant benefits is the combination of photovoltaics and green roofs. Green roofs improve the microclimate, reduce solar panel temperatures, and can enhance system performance. They also increase heat resistance, ease pressure on the sewer system, and extend the lifespan of roof membranes. In urban districts, this delivers a dual benefit of energy generation and climate adaptation.

The role of multi-family housing will become even more important in the years ahead. These buildings offer technical, economic, and environmental advantages: they help curb energy costs, provide stable revenue streams, and contribute to relieving pressure on the grid. At the same time, they create a robust foundation for heat pumps and electric mobility. To harness this potential, clear and reliable framework conditions are needed. These include transparent regulations for metering and billing, standardized processes for grid and metering point operators, and a stronger policy focus on existing buildings as the core of the energy transition.

The technology is available, and the business models are proven. The next step is to further develop existing structures so that the opportunities in multi-family housing and on urban rooftops are fully exploited.

Setting the Tempo of Transformation: Modular Renovation Picks Up Speed

The construction industry is among the largest emitters of greenhouse gases, with buildings accounting for around 35% of Germany’s total energy consumption. Germany’s ambitious goal of achieving climate neutrality by 2045 presents the sector with major challenges. Energy-efficient retrofitting of the existing building stock is a key lever for sustainable change. Traditional renovation methods may appear cost-effective at first glance, but long construction periods, rising labour costs, and lost rental income during extended works often drive overall costs higher – costs that many clients underestimate. This is where modular renovation offers a compelling alternative: it improves efficiency and quality, significantly shortens construction times, and provides an intelligent response to the skilled labour shortage.

Energiesprong: The Dutch Blueprint for Germany
The Dutch concept of Energiesprong has been a crucial driving force for the renovation industry. Rather than upgrading individual building components on-site, an energy-efficient building envelope is prefabricated and digitally planned. A 3D laser scan captures the necessary data for a model that serves as a blueprint for serial production. Windows, insulation, sun protection, and heat-recovery ventilation are all integrated at the factory and quickly installed on-site. In Germany, the German Energy Agency (DENA), with support from the Federal Ministry for Economic Affairs and Energy, has further developed the concept. Since 2023, the Federal Funding Program for Efficient Buildings (BEG) has supported modular renovations with a 15% bonus for projects that achieve the Efficiency House 55 standard or better. Today, over 450 companies are active in modular renovation in Germany, around 50 of them as full-service providers.

Market Development: From Niche Product to Growth Market
The transition from niche to mainstream application has been rapid. In 2022, modular renovations accounted for just 2% of subsidised Efficiency House projects. By 2024, almost one in four subsidised renovations was being carried out using modular methods. This dynamic unleashes potential – rising volumes reduce costs for prefabricated elements, while on-site processes become increasingly seamless. Most notably, the open collaboration between companies fosters an unparalleled culture of innovation.

Speed, Quality, Sustainability: Clear Advantages
Storey-high modules up to twelve metres long are delivered by truck and precisely positioned on the building. Digital twins allow exact planning of production and installation, ensuring even complex processes run smoothly. Up to 500 sqm of facade can now be renovated per day – a task that previously took months is completed in just a few weeks.

From Renovation Case to Energy Model: Two Exemplary Projects
In Witten, a 1950s residential complex with 112 units underwent a modular renovation using prefabricated facade elements, including insulation, building services, and photovoltaics. Energy consumption fell from 145 to approximately 26 kWh/m²a, representing a leap from energy efficiency class E to A+ – alongside a marked improvement in living comfort. In Herford, the primary energy demand of a residential complex was reduced from 386 to 49 kWh/m²a. Photovoltaics installed on roofs and loggias generate an additional 75 kWh/m²a, producing a surplus of 26 kWh/m²a. This saves approximately 170 tonnes of CO₂ annually, equivalent to up to 12,000 km of emission-free mobility per apartment – a striking example of sector-spanning sustainability.

Market Potential: A Renovation Wave Is Imminent
The number of potentially suitable buildings is enormous: roughly 2.1 million multi-family dwellings from the 1950s to 1970s are ideal candidates for modular renovation. Single-family homes and non-residential buildings are also becoming increasingly relevant. By 2045, up to four million residential units and two million other buildings, including schools and offices, could benefit from this approach. The estimated market volume is around €500 billion, much of which can be refinanced through energy cost savings – offering the construction sector a substantial new field of activity.
Aesthetics is the Fourth Pillar of Modular Renovation

Technically sophisticated, economically attractive, and environmentally sound – but what about design quality? Modular renovation often still appears functional and pragmatic. Without architectural ambition, it risks being seen as a mere construction product, dictated by system providers rather than designers. Yet some providers are showing that standardisation and design are not mutually exclusive. Instead of criticising the logic of prefabricated housing, architects can help set the pace: with creative module adaptations and a stylish design language. Only by combining efficiency, sustainability, and aesthetic appeal can modular renovation deliver truly future-ready buildings

Residential Real Estate in Berlin: A Market Creating Stability Despite Regulation

For years, Berlin’s housing market has been defined by a tension arising from political interventions, regulatory debates, and planning uncertainties. At the same time, this environment is creating a surprisingly robust foundation for long-term investors. Severe supply shortages, driven by low turnover in existing properties and stagnating new construction, are stabilising the market and producing conditions rarely seen elsewhere. Investors who understand the mechanics of this unique market know they have a window of unusually clear entry opportunities.

Debates around rent controls, indexed rents, pre-emption rights, and potential expropriations have been shaping perceptions of the Berlin market. However, while political pressure often signals uncertainty, it has, in practice, led to a noticeable reduction in supply. Tenant turnover is decreasing, investors are cautious about new projects, and permit approvals take ages. New construction, already under cost pressure, is losing further momentum. This creates a structural shortage, particularly in the privately financed new-build segment. Despite the current interest rate environment, recently completed projects are achieving prices that reflect strong investor confidence. At the same time, existing property owners are increasingly concerned about further regulatory tightening, with many considering divesting their properties before political measures permanently impact their returns. This presents a strategic window for investors to secure projects that would otherwise be difficult to access.

The Berlin housing market is currently divided into distinct sub-segments, each offering its own unique opportunities. Private buyers and family offices dominate the apartment building market, benefiting from reliable tenant structures, predictable returns, and long-term value appreciation. In the institutional sector, modernising existing stock is becoming increasingly important. Energy-efficient renovations, ESG-focused optimisations, and professional management create added value that can be further enhanced through certifications. New-build projects, in turn, offer a comparatively predictable entry model via forward deals, with costs, ESG standards, and cash flows fixed early in the process.

One segment that has long been long overlooked but is now gaining relevance is subsidised housing. Current subsidy frameworks, combined with interest rate policies, enable sales to municipal and cooperative providers under guaranteed conditions. These providers typically handle both the financing and subsidy applications, significantly reducing complexity. As long as state-level programmes continue – and there are strong indications that this will remain the case beyond 2025 – this creates a segment with reliable returns and clear rules.

Within the city, the picture varies. Established districts such as Charlottenburg, Prenzlauer Berg, and Mitte continue to see exceptionally high demand for existing stock. Despite high entry prices, buyers benefit from stable structures and rents “artificially” held below market rates, which promotes long-term value appreciation. In districts such as Lichtenberg and Neukölln, hybrid projects combining subsidised and private units are emerging, enhancing stability and offering investors additional flexibility. In areas like Marzahn and Spandau, low land prices help make subsidised developments economically viable. Support from Investitionsbank Berlin and guaranteed purchase agreements with municipal authorities further improve planning certainty, making these projects increasingly attractive for institutional investors.

Investors who clearly distinguish between segments and understand their respective dynamics can currently capitalise on Berlin’s residential real estate market. Whether through forward deals during construction, ESG-oriented portfolio strategies, or participation in subsidised projects, the interplay of structural scarcity, reliable demand, and political support is creating a rare market phase. The coming months will be crucial for initiating projects and strategically positioning capital. Acting now will not only allow investors to secure economic opportunities but also to establish a long-term position in one of Europe’s most compelling residential real estate markets.

Berlin Shows How Priced-In Risks Create a Market of Opportunities

When I talk to entrepreneurs from other sectors about residential real estate, they often tell me that I’m overly optimistic about the market. This feedback isn’t unfamiliar to me; we real estate agents are generally considered to be professional optimists anyway. I like to reply: I’m not being optimistic, I’m reading the numbers. And these figures now paint a clear picture. What we’ve observed in discussions, negotiations, and transactions over recent months is confirmed by market data and our new Residential Investment Barometer.

The Index Hits a Record High
The new Schick Residential Investment Index has reached a record high. At 59.6 points, it is at its highest level since the survey began, indicating that the market has left its period of uncertainty behind. The index aggregates key findings from a sentiment survey of 3,000 private and commercial investors, covering expected price developments, investment opportunities, and buying and selling strategies. With this new record high, the index confirms what has already become apparent in many discussions. Market participants see an attractive environment for investments.

Over 80 per cent of respondents expect prices to remain stable or rise, and around 60 per cent are planning new acquisitions within the next 12 months. This is not euphoria; it reflects the behaviour of an industry that has accepted the new price and interest rate environment and is actively trading again. The index’s record high is therefore not spectacular, but consistent. It confirms trends long visible in the market.

Berlin: A Market Full of Opportunities
The picture becomes particularly compelling when we focus on Berlin. The capital is by far Germany’s largest residential investment market, accounting for 24 per cent of the sales volume among the country’s 50 largest cities. And this despite the fact that it is arguably the city with the most intense housing policy debates – from the failed rent cap and expropriation initiatives to ever-new proposals for tenancy law interventions. Such a complex environment might be expected to deter investors.

Our nationwide survey shows the opposite. Berlin attracts strong national and international interest: 60 per cent of respondents across Germany rate the capital an attractive investment destination. For 45 per cent, population growth is the main driver, while the city’s economic and academic strengths also play a key role. Berlin’s political debates are well-known, factored into prices, and treated as part of the calculation by investors.

Anyone who objects that this is “merely” a snapshot of sentiment will find the same trend reflected in the “hard” market data. The Berlin residential property market report for Q3 2025 shows that activity has increased significantly once again. The transaction volume reached €728.6 million, roughly 34 per cent above last year – with an average of 195 sales per quarter over the past four quarters, about 20 per cent higher than the same period the previous year. More capital, more deals, greater willingness to close at attractive prices.

Implications for Investors
85 per cent of respondents rate the current market as neutral to positive. This is not a sudden swing in sentiment, but rather the result of a market realigning itself.

Berlin plays a special role: The city is politically demanding, yet remains moderately priced and offers very attractive entry prices compared to the rest of Germany, prices that don’t reflect its status as an international city. Those who understand the framework and are willing to work within it will find opportunities here that other markets cannot match.

The Residential Investment Barometer’s record high, Berlin’s attractiveness in our survey, and rising transaction volumes all tell the same story: the residential investment market exhibits positive stability, particularly in Berlin. Clearly priced-in risks create opportunities for alert investors.

You could call that optimistic. I call it reading the numbers.

Acute housing shortage expected in Berlin

As part of a housing market barometer conducted by Investitionsbank Berlin (IBB), around 200 real estate experts were surveyed, including those working for housing companies, banks, property management companies, real estate agents, academia, and politics. According to the survey, industry experts expect a further decline in the supply of rental apartments in Berlin, especially in the lower to middle price segment. The tense situation on the rental market is primarily caused by insufficient supply. For the first time in a long time, a balance between supply and demand can be found in the highest price segment, starting at net cold rents of €20 per square meter. According to the survey, medium-sized apartments with a living space of between 70 and 100 square meters are in particularly high demand, but are lacking in the lower and middle price segments. The situation is further exacerbated by the increasing decline in the supply of social housing. According to experts, the reasons for the continuing shortage of housing in Berlin are primarily high construction costs, coupled with regulations, lengthy building permit procedures, and strict rules for tenant protection, which deter private investors.

Berlin has the fewest energy-efficient apartments in the east

According to a recent analysis by Postbank’s 2025 Housing Atlas, which was compiled in collaboration with the Hamburg Institute of International Economics (HWWI), the supply of energy-efficient apartments in Berlin is below average for eastern Germany. To this end, Postbank and HWWI examined the available purchase offers with a designated energy efficiency rating of A+ (very good) to D (average) in German cities with more than 100,000 inhabitants. Berlin is not listed among the ten cities with the highest proportion of energy-efficient apartments; instead, eastern German cities dominate. With a share of 33.1 percent, Berlin is just above the average for the seven metropolitan areas, which is 32.3 percent, and the average for all major cities (31 percent). Jena takes first place with a share of 47.9 percent, followed by Cottbus with 43.7 percent, Chemnitz in eighth place with 40.1 percent, and Erfurt with 39.7 percent. In the ranking of price differences between energy-efficient and less energy-efficient apartments in metropolitan areas, Hamburg leads with an average price per square meter of €7,409 per energy-efficient square meter, which corresponds to a surcharge of €2,545 compared to less efficient spaces. Munich has a difference of €2,256, Frankfurt €2,237. Berlin ranks in the middle with a difference of €1,436.