By Indradip Ghosh
BENGALURU (Reuters) -German home prices will rise 3% in 2025, after a two-year decline, and grow slightly faster through 2027, according to a Reuters poll of property experts who said affordability would worsen.
The real estate sector in Europe's biggest economy is gradually emerging from its deepest slump in decades, recent data showed, cushioned by the European Central Bank's cumulative 200 basis points of interest rate cuts.
Home prices increased 3.8% year-on-year in the first quarter,
the fastest quarterly growth since 2022, while home building permits - an indicator of future construction activity - surged 7.9% in June from a year earlier.
However, broader subdued economic conditions pose risks to a sustained housing market recovery. Germany's economy contracted last quarter, dimming expectations of a prolonged recovery.
Home prices will increase 3.0% in 2025, their first lift in three years, and 3.5% in 2026, the September 3-15 Reuters poll of 14 property analysts found. They fell 8.4% in 2023 and 1.5% last year.
"The recovery in the housing market continues, despite stagnating affordability of purchasing residential real estate, and we do not see any indications of a reversal of this trend. However, the high level of uncertainty, both economically and geopolitically... is likely to continue to weigh on consumer confidence," said Carsten Brzeski, global head of macro at ING.
Eleven of the 14 analysts said affordability for first-time home buyers would worsen over the coming year, despite the ECB being expected to hold rates for a long period.
"A further substantial improvement in affordability is not foreseeable for the remainder of 2025 and the coming year," said Sebastian Wunsch, head of property economic analyses at GEWOS, an independent consulting and research institute.
"Given the continued very low number of building permits for rental housing construction... the market situation is unlikely to change fundamentally in the foreseeable future," Wunsch said.
Average urban home rents will increase 3%-5% over the coming year, according to the poll's median view, despite government plans to extend rent controls.
(Other stories from the Q3 global Reuters housing poll)
(Reporting by Indradip Ghosh; Polling by Debrah Gomes and Aman Kumar Soni; Editing by Susan Fenton)
