Rapidly escalating house prices in Germany's hottest property markets this year
Rising Real Estate Prices Across Germany: A Look at the Role of Pfandbrief Banks
In the heart of Europe, Germany's real estate market continues to show signs of growth, with residential and commercial properties witnessing a steady increase in prices. This trend is underpinned by the significant role played by Pfandbrief banks, specialized financial institutions that issue Pfandbriefe—secured covered bonds backed mainly by real estate loans or public sector loans.
Pfandbrief banks, such as Deutsche Pfandbriefbank, are key players in the German real estate market. These financial institutions provide stable, long-term financing primarily for commercial real estate, including offices, logistics, and residential properties. Their core business consists of granting real estate loans secured by Pfandbriefe, allowing them to raise capital at favorable terms to support property financing.
The Pfandbriefe portfolio of Deutsche Pfandbriefbank is diverse, with office properties accounting for 50%, logistics making up 18%, and residential real estate comprising 17%. This financing supports development, renovation, and energy efficiency improvements in commercial and residential properties, contributing to market stability and growth.
Recent figures from the Federal Statistical Office (Destatis) and the Association of Pfandbrief Banks (VDP) reveal an upward trend in residential real estate prices. In the first quarter of 2025, prices rose by 1.4% compared to the previous quarter, with the fastest growth observed in Duesseldorf (2%) and Frankfurt am Main (1.7%). This marks the fifth quarter in a row where prices have risen.
The recovery phase on the real estate market in Germany is evident in various regions. For instance, North Frisia, which includes the island of Sylt, was one of the four most expensive regions in Germany in 2024. However, new-build prices in the region have seen a decline of 9.5%, while the prices of single-family homes and condominiums in new buildings have risen significantly, up 12 and ten percent respectively.
Berlin, the capital city, also experienced a surge in property sales last year, with 20,789 units sold, a rise of 18% compared to the year before. The total value of properties sold in the city was €14.9 billion, an increase of 20%. Notable sales included a villa in Spandau that went for €17.2 million, and the most expensive apartment that sold for €8.3 million in Charlottenburg.
Outside Bavaria, cities such as Hamburg, Frankfurt, Freiburg, Stuttgart, and Duesseldorf continue to be among the most expensive markets for new-build apartments. In the second quarter of 2025, prices for new-build apartments rose in about 75% of all German cities and districts compared to the previous year, with the price hike being particularly sharp around the Munich area.
It's worth noting that Pfandbriefe are a special type of bond, backed by long-term assets like mortgages, that have existed in Germany for hundreds of years. These bonds are considered secure due to their asset backing and strict regulatory framework, enabling banks to finance real estate projects sustainably.
In conclusion, Pfandbrief banks like Deutsche Pfandbriefbank are instrumental in funding real estate investment and development in Germany by issuing covered bonds backed by high-quality real estate loans. This financing supports development, renovation, and energy efficiency improvements in commercial and residential properties, promoting market stability and growth.
Pfandbrief banks, such as Deutsche Pfandbriefbank, play a crucial role in funding real estate investment and development, particularly for residential properties, by issuing covered bonds backed by high-quality real estate loans (finance, investing). The recovery phase in the real estate market, as evidenced in various regions like North Frisia and Berlin, contributes to an upward trend in residential property prices nationwide (housing-market, real-estate).
