First Housing Market Report from empirica: No Recovery in Sight

The independent economic and social science research and consulting institute empirica has published its first housing market report. It provides a comprehensive outlook on the housing market in 2026. The study focuses on demand, supply and price developments. New construction has collapsed, while rents are rising. Despite stagnating population figures, the housing shortage will continue to increase. High interest rates are causing purchase prices to stagnate once again.

Demand for Housing Remains High Despite Declining Population

The ongoing downsizing of households is leading to a further increase in demand for housing. Annual demand for new builds currently stands at around 225,000 homes and will only grow slightly after 2030, to between 260,000 and 270,000 homes. This demand is not being met by the volume of new builds, which is too low. Following the sharp slump caused by the rise in interest rates, only around 190,000 homes were completed nationwide in 2025. Completions are expected to be even lower in 2026.

Negative Record for Completion of Detached and Semi-detached Houses

The decline in completions has been similarly pronounced across the country and for all types of buildings. However, as the housing boom of the 2010s completely bypassed the construction of single-family and two-family homes, completions in this sector reached an all-time low. Never since the founding of the Federal Republic have fewer single-family and two-family homes been built than in 2024. This negative record will be broken again in 2025.

However, the number of approved dwellings has probably reached its lowest point. In 2025, around 230,000 dwellings are likely to have been approved, which is more than in 2024, when the figure was around 215,000. Based on the current conditions, the authors assume that the market has bottomed out, but do not expect this to mark the beginning of a new cycle of residential construction.

New Building Rents at New Normal Level

Purchase prices and rents for new-build flats are largely determined by construction and land costs. To cover costs, rents for new-build flats in major cities in western Germany now have to be around €20 per square metre. According to empirica, this level is not a short-term price anomaly, but rather the new market equilibrium price. At present, however, this level is only being reached in a few locations (Munich and surrounding area, Frankfurt/Main, Hamburg), meaning that new construction projects are not yet profitable across the board.

Existing Rents Continue to Rise

Rents for existing flats also continue to rise. Following a nationwide increase of 4.4 per cent in 2025, further increases of three to four per cent are expected for 2026. “Rental prices for existing apartments are following the development of rents for new builds with a certain time lag and at a lower level. Given that rents for new builds are €20 per square metre, rental prices for existing apartments in large cities in western Germany will rise to €15 to €16 per square metre, and in medium-sized cities to €13 to €14. While these values have already been largely achieved in the major cities, noticeable adjustments are still to come in many medium-sized cities,” explains Prof. Dr. Harald Simons, member of the empirica executive board.

Fundamentals and Objective of the Housing Market Report

The 2026 Housing Market Report is based on an analysis of regional official statistics and market data recorded in the empirica regio database and evaluated as part of the report. The empirica Housing Market Report is intended as a reference work for the German housing market, based on the ongoing description of market developments, the updated empirica forecasts and the extensive expertise of empirica and empirica regio. The authors of the report are Prof. Dr. Harald Simons, member of the empirica Executive Board, and Jan Grade, Managing Director of empirica regio.

empirica ag – Research & Consulting

empirica  is an independent economic and social science research and consulting institute. Together, the offices in Berlin and Bonn employ around 40 people with broad training and experience (economics, geography, urban planning, social sciences).

empirica works both domestically and internationally and has an extensive network of partners. Regular engagements in all major urban regions in Germany and a large number of medium-sized towns form the basis for a broad and up-to-date profile of expertise.

empirica regio GmbH

empirica regio GmbH  specialises in the processing, analysis and provision of regional data for the real estate industry. Its market and context data offer analysts, researchers and investors meaningful decision-making bases and background information from a single source, without the need for time-consuming research and preparation.