Rents in Germany’s major cities are climbing rapidly, with Berlin standing out as the only exception, according to a new report from the Cologne Institute for Economic Research (IW).
The IW, a respected economic think tank, has analysed millions of property listings to provide a detailed snapshot of the current housing market.
The study reveals where prices are currently rising fastest, where they’re slowing down, and what’s driving these trends.
Where are rents rising the fastest now?
For tenants across Germany, the latest IW report brings mixed news.
Rents for new apartment contracts in large cities have increased by an average of 3.8 percent compared to last year, and by one percent since the previous quarter.
The sharpest rises have been seen in DĂĽsseldorf (up 5.6 percent), Munich (up 5.3 percent) and Cologne (5.1 percent).
Leipzig and Hamburg have also experienced strong growth, with rents rising by 4.7 percent and 4.4 percent respectively.
The only major city bucking this trend is Berlin, where new contract rents have actually fallen slightly (by 0.2 percent) in the past year.
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However, the IW cautions that this is likely a short-term correction following years of above-average increases after the city’s rent cap was overturned.
The authors warned that it was “too early to sound the all-clear” for Berlin, as the underlying pressures on the rental market remain.
What’s driving these changes?
The IW points to a persistent shortage of available flats, especially in urban centres, coupled with robust demand.
Many people are being priced out of city centres and are moving to surrounding areas, where rents are also rising quickly – up 4.1 percent year-on-year in the suburbs of large cities.
The report notes that the combination of good transport connections, local infrastructure and relatively more affordable rents is making these areas increasingly attractive.
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What buyers and sellers need to know
Practically speaking, this means that people moving to or within Germany's big cities (whether renting or buying a new home) can expect that prices are up.
For those looking at buying a home, the IW report suggests that the German property market is experiencing a cautious recovery, which means prices for buyers are starting to go up again.
Prices for single-family and two-family homes rose by 0.9 percent in the third quarter of 2025 compared to the previous quarter and are now 3.5 percent higher than a year ago.
Apartments have also become more expensive, with prices up 2.6 percent year-on-year.
The strongest real estate price increases have been recorded in the suburbs of large cities, where single-family and two-family homes are up 4.4 percent over the past year.
The growing strength of the market attributed to stable construction interest rates and rising wages, which have improved affordability for many households.
As a result, more people are opting for home ownership, particularly in areas that offer a balance between accessibility and price.
Regionally, Dortmund, Cologne and DĂĽsseldorf have seen the most dynamic growth in purchase prices, while Munich and Stuttgart have experienced more subdued increases.
Frankfurt am Main is the only major city to record a slight decline in property prices over the past year.
In addition, the IW notes that the luxury segment of the market – properties in the top five percent of the price range – has remained particularly stable in Germany, even as high-end properties in other countries have lost value during recent crises.
The report attributes this resilience to the high energy efficiency of German luxury homes and a renewed focus on central, desirable locations.
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The IW Housing Index is based on a price analysis of several million property advertisements, covering both advertised purchase prices and new contract rents.
What’s to come?
Looking ahead, the IW expects both rents and property prices to continue rising in parallel, as the market settles into a “new normal.”
However, the institute warned that the underlying pressure remains high due to a persistent shortage of new housing.
According to IW forecasts, Germany needs around 372,000 new flats per year to meet demand, but only about 235,000 are expected to be completed this year.
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