German home prices rise for second consecutive quarter after deep slump

By Rene Wagner and Tom Sims

FRANKFURT (Reuters) -German residential property prices rose 3.8% in the first quarter of 2025 from a year earlier, a second consecutive rise after a period of steep declines during a nationwide real-estate slump, federal data showed on Tuesday.

After more than a decade of uninterrupted gains, home prices began to drop in 2022 after the European Central Bank began a rapid increase in interest rates to curb rampant inflation, sparking Germany's worst real estate crisis in decades.

The modest recovery that kicked in during the last quarter of 2024 has been tempered by an increase in mortgage rates that might keep a lid on the market.

"Fewer households can afford to buy property than 10 years ago. Prices will continue to rise slightly, but we do not expect another boom," said Martin Gueth, economist at LBBW Research.

Germany, Europe's largest economy, is also in the midst of a housing shortage made worse by the recent slump that has dampened construction and put upward pressure on rents.

Last week, Germany's parliament approved government plans to extend rent controls to make housing more affordable.

The 3.8% increase in the first quarter follows a 1.9% rise in the fourth quarter of last year, and is a sharp turnaround from a drop of more than 10% at one point in 2023.

Price increases were steepest in the nation's largest cities, including Berlin, Munich and Frankfurt, the federal statistics office said.

Meanwhile, the outlook for the broader property sector - especially offices - has been more muted.

(Reporting by Tom Sims; editing by Rachel More and Mark Heinrich)