Which Federal State is Suitable for Investment Properties? All 16 States Compared 2026
Michael Pauker · 2026-10-13
3.5 to 6.5% | Transfer Tax | State Laws, as of 09/29/2026 1.9 to 8.9% | Vacant Apartments | 2022 Census, as of 05/15/2022 €135,000 to €499,000 | Avg. Price per Sold Apartment | Expert Committees (AK OGA), 2024 +1.5 to −12.1% | Population by 2040 | Destatis, 16th Projection, Variant 2
You want to buy and rent out an apartment. Before thinking about the neighborhood and floor plan, a bigger question arises: In which federal state, actually? In Hamburg, a sold condominium cost an average of €499,000 in 2024; in Saxony-Anhalt, it was €135,000. When buying, you pay 3.5% real estate transfer tax in Bavaria, but 6.5% in Brandenburg.
Many guides answer this question with a ranking. We consider that misleading. A state with low prices usually has more vacant apartments. A state with low vacancy usually has high prices and strict rental rules. Which of these is better for you depends on your budget, your tax rate, and your patience.
This page therefore presents all 16 states side-by-side with the same seven key figures, each with its source. Afterwards, we categorize the states into four types and honestly calculate the same apartment in three states, including purchase costs.
There is no single best federal state for an investment property, only the right one. States differ in real estate transfer tax (3.5 to 6.5%), vacancy (1.9 to 8.9% according to the 2022 census), purchase price (averaging €135,000 to €499,000 per sold apartment in 2024), and expected population (+1.5 to −12.1% by 2040). Low prices usually go hand-in-hand with higher vacancy and a shrinking population, while low vacancy comes with high prices and rent control. Ultimately, the city and the location are decisive, not the state average.
01The 16 States at a Glance
The table is sorted alphabetically. There is intentionally no ranking. Each column comes from a single source so that the states remain comparable. The definitions are explained directly below the table.
| State | Transfer Tax | Vacancy¹ | Avg. Price per Apt.² | Avg. Net Rent³ | Population 2040⁴ | Rent Control⁵ | Unemployment Rate⁶ |
|---|---|---|---|---|---|---|---|
| Baden-Württemberg | 5.0% | 4.2% | €241,000 | €8.13 | −1.3% | partial (130 municipalities) | 4.7% |
| Bavaria | 3.5% | 4.2% | €322,000 | €8.74 | −0.7% | partial (284 municipalities) | 4.2% |
| Berlin | 6.0% | 2.0% | €383,000 | €7.67 | +1.5% | yes, entire city | 10.4% |
| Brandenburg | 6.5% | 5.2% | €237,000 | €6.21 | −2.8% | partial (36 municipalities) | 6.3% |
| Bremen | 5.5% | 3.7% | €163,000 | €7.34 | −1.6% | partial (City of Bremen) | 11.2% |
| Hamburg | 5.5% | 1.9% | €499,000 | €9.16 | +1.5% | yes, entire city | 8.4% |
| Hesse | 6.0% | 3.8% | €260,000 | €8.21 | −1.5% | partial (49 municipalities) | 5.9% |
| Mecklenburg-Vorpommern | 6.0% | 5.5% | €222,000 | €5.91 | −7.7% | partial (Rostock, Greifswald) | 7.6% |
| Lower Saxony | 5.0% | 4.1% | €176,000 | €6.56 | −2.9% | partial (57 municipalities) | 6.1% |
| North Rhine-Westphalia | 6.5% | 3.3% | €194,000 | €6.82 | −3.3% | partial (57 municipalities) | 7.9% |
| Rhineland-Palatinate | 5.0% | 4.8% | €231,000 | €6.75 | −2.3% | partial (99 municipalities) | 5.5% |
| Saarland | 6.5% | 5.5% | €153,000 | €6.12 | −6.7% | no | 7.3% |
| Saxony | 5.5% | 8.5% | €161,000 | €5.72 | −8.1% | partial (Dresden, Leipzig) | 7.1% |
| Saxony-Anhalt | 5.0% | 8.9% | €135,000 | €5.38 | −11.9% | no | 8.0% |
| Schleswig-Holstein | 6.5% | 2.7% | €232,000 | €7.41 | −1.6% | no | 5.7% |
| Thuringia | 5.0% | 7.8% | €137,000 | €5.65 | −12.1% | partial (Erfurt, Jena) | 6.3% |
| Germany | 3.5 to 6.5% | 4.3% | €246,000 | €7.28 | −2.8% | – | 6.4% |
About the Table: Sources and Definitions
¹ Vacancy: 2022 Census, as of 05/15/2022, share of vacant apartments. The value is over three years old; newer official figures for all states do not exist. Bremen: Value for the state including Bremerhaven. For the city of Bremen alone, our city page cites 3.2%.
² Purchase Price: average price per sold condominium in 2024 from all notarized purchase contracts, Working Group of Senior Expert Committees (AK OGA), Real Estate Market Report Germany 2025. This is not a price per square meter. It also depends on how large the sold apartments were and how many new builds were included. State pages sometimes cite square meter prices from state market reports; these are not comparable across all states because each expert committee defines them differently (median vs. mean, only resales vs. all construction years).
³ Rent: average net cold rent per m² according to the 2022 Census, i.e., across all existing rental contracts, including very old ones. New rental contracts are usually significantly higher. For Bremen, the value refers to all rented apartments; for other states, to apartments in residential buildings.
⁴ Forecast: Change in population from 2024 to 2040 according to the 16th coordinated population projection by federal and state governments, Variant 2 (middle assumptions), own calculation. We use this source because it is the only one that calculates all 16 states with the same assumptions. State pages sometimes cite projections from state offices with a different base year. These can deviate significantly.
⁵ Rent Control: State ordinances according to § 556d BGB, as of 09/29/2026. In Hesse, the ordinance expires on 11/25/2026 (new version with 71 municipalities announced); in Baden-Württemberg on 12/31/2026 (draft with 133 municipalities).
⁶ Unemployment Rate: Federal Employment Agency, September 2026. Bremen: State including Bremerhaven; the city of Bremen alone was at 10.6%.
02What the State Figures Show and What They Don't
Reading the table from top to bottom, a pattern emerges. Where vacancy is low, prices and rents are high. Where prices are low, more apartments are vacant and the forecast points downward. Supply and demand are behind this.
At the same time, every state average masks large differences. In Saxony, an average of 8.5% of apartments were vacant in 2022. In Dresden, it was 4.0%, in the district of Zwickau 12.8%. In Bavaria, vacancy is 4.2%, in Munich 2.4%, and in the Wunsiedel district 9.0%. A state is therefore only the framework for your apartment.
The state comparison still helps with two questions. First: What costs and rules apply throughout the state, regardless of the city? These are the real estate transfer tax and rent control. Second: How carefully do you need to select within the state? In a state with 8% vacancy, selecting the city is more important than in one with 3%.
Where are the properties I should invest in located?
We hear this question often in initial consultations, usually right at the beginning. It is justified. The honest answer starts with the state, because it determines taxes and rental rules, and ends with the city, street, and house.
03There Is No Best State, Only the Right One
Four state types can be derived from the figures. The boundaries are fluid, and in every type there are cities that function differently from their state. They serve as an initial orientation.
| Type | States | What the Figures Show | Suited for |
|---|---|---|---|
| City States | Hamburg, Berlin, Bremen | Vacancy 1.9 to 3.7%, forecast −1.6 to +1.5%, rent control, high prices in Hamburg and Berlin | Investors who prioritize demand over current yield and can afford monthly payments |
| High Demand in the South and West | Bavaria, Baden-Württemberg, Hesse | Vacancy 3.8 to 4.2%, rents over €8/m², prices €241,000 to €322,000, unemployment under 6% | Investors with a higher budget and a long investment horizon |
| Midfield with a Large Rental Market | North Rhine-Westphalia, Lower Saxony, Rhineland-Palatinate, Schleswig-Holstein | Vacancy 2.7 to 4.8%, prices €176,000 to €232,000, forecast −1.6 to −3.3% | Investors seeking a balance between price and demand and who choose the city carefully |
| Affordable, with Over-supply Outside Certain Cities | Saxony, Saxony-Anhalt, Thuringia, Mecklenburg-Vorpommern, Saarland, Brandenburg | Vacancy 5.2 to 8.9%, forecast −2.8 to −12.1%, prices mostly under €225,000 | Investors who specifically choose individual cities with low vacancy and can financially buffer vacancy |
Brandenburg fits the fourth type only with restrictions. In the Berlin suburban area, the population grew in 2025; in the rest of the state, it fell. Mecklenburg-Vorpommern with Rostock and the coast, and Saxony with Leipzig and Dresden, are similarly divided.
In the fourth type, the differences are particularly wide. For Leipzig, the BBSR expects a significant plus in its spatial planning projection until 2045; for the Mansfeld-Südharz district in Saxony-Anhalt, a minus of 24.2%. Both are less than 100 kilometers apart.
04Yield or Demand: What You Are Weighing
The table shows a trade-off that no region resolves. In affordable states, rent is higher relative to the purchase price. The gross rental yield looks better there. On the other hand, the risk is higher that the apartment will stand empty for months between tenants or be difficult to sell in 15 years.
In states with low vacancy, it's the other way around. You usually find tenants quickly, but you pay significantly more for every euro of annual rent. For a financed apartment, this usually means: You add money every month, especially in the first years.
- You want to start with little capital and hold the apartment for a long time.
- You can cover several months of vacancy from reserves.
- You choose a city in the state where vacancy is significantly below the state average.
- You can permanently afford a monthly payment over many years.
- Quick re-letting and a later sale to many possible buyers are important to you.
- You can live with rent control and a lowered cap on rent increases.
These columns are not an either/or forever. Many investors mix: one apartment in a high-priced city with stable demand, a second in a more affordable city with higher rent relative to the price.
05Real Estate Transfer Tax: 3.5% to 6.5% Depending on the State
The real estate transfer tax makes up the bulk of the purchase costs. Each state sets the rate itself. It applies to every apartment in the state, whether in a big city or a village, and you usually pay it from your own funds.
| Rate | States | Tax at €250,000 Purchase Price |
|---|---|---|
| 3.5% | Bavaria | €8,750 |
| 5.0% | Baden-Württemberg, Lower Saxony, Rhineland-Palatinate, Saxony-Anhalt, Thuringia | €12,500 |
| 5.5% | Bremen, Hamburg, Saxony | €13,750 |
| 6.0% | Berlin, Hesse, Mecklenburg-Vorpommern | €15,000 |
| 6.5% | Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein | €16,250 |
Source: State laws, checked on 09/29/2026; own calculation. The only change in recent years affected Bremen (5.0 to 5.5% since 07/01/2025); Thuringia lowered from 6.5 to 5.0% as of 01/01/2024. All rates, exemptions, and calculation rules are on the Transfer Tax by State page.
For a rented apartment, the transfer tax counts toward the acquisition costs. It therefore works through the depreciation of the building share, distributed over many years, and not as an immediate deduction in the year of purchase. The portion attributable to the land has no tax effect at all.
- Your equity is tight and must primarily cover the incidental costs.
- You tend to buy expensive apartments where every percentage point means several thousand euros.
- You don't rule out selling the apartment again after a few years.
- You want to hold the apartment for 20 years or longer.
- The purchase price and rent in the state fit your goals better than in the neighboring state.
- You are buying an affordable apartment where 1.5 percentage points are only a few thousand euros.
06Example Calculation: The Same Apartment in Three States
How strongly do purchase price, rent, and tax rate work together? We take an existing apartment with 60 m² and mentally place it in three states: Bavaria (low tax, high prices), Lower Saxony (medium tax rate, medium prices), and Brandenburg (high tax). Purchase price and rent correspond to the state level. The figures are a calculation example and not a forecast.
| Bavaria | Lower Saxony | Brandenburg
Purchase Price per m² | €3,600 | €2,130 | €2,903 Purchase Price | €216,000 | €127,800 | €174,180 Transfer Tax | €7,560 (3.5%) | €6,390 (5.0%) | €11,321 (6.5%) ~ Notary and Land Registry (approx. 1.6%) | €3,456 | €2,045 | €2,787 = Purchase Costs without Agent | €11,016 (5.1%) | €8,435 (6.6%) | €14,108 (8.1%) Rent per m² (Census Average) | €8.74 | €6.56 | €6.21 Annual Net Rent | €6,292.80 | €4,723.20 | €4,471.20 ~ Purchase Price Multiplier | 34.3 | 27.1 | 39.0 = Gross Yield on Purchase Price | 2.9% | 3.7% | 2.6% = Purchase Costs in Annual Rents | 1.8 | 1.8 | 3.2
Own calculation, as of 10/13/2026. Purchase prices: Senior Expert Committee of the state, 2025 cases (Bavaria median resale, Lower Saxony average resale, Brandenburg resales in multi-family houses). Rent: Avg. net cold rent Census 2022. Transfer tax rounded down to full euros. Notary and land registry flat 1.6% (assumption). Without agent, without financing, tax, and value development.
The calculation shows three things. In Bavaria, the tax is low, but the purchase price is so high that the secondary costs at €11,016 are still above those in Lower Saxony. In Lower Saxony, the apartment is cheaper, and the rent covers the purchase price after about 27 years instead of 34. In Brandenburg, the secondary costs at €14,108 cost more than three annual rents.
The Brandenburg value has a catch, however, which shows how carefully one must calculate with state averages. The purchase price reflects which apartments were sold in 2025. The Census rent, on the other hand, applies to all rental contracts in the entire state, including old and rural ones. With the average asking rent for new contracts of €9.12/m² (BBSR, 2023), the gross rental yield would be 3.8%.
Bavaria | 1.75 | 1.8 annual rents Lower Saxony | 1.79 | 1.8 annual rents Brandenburg | 3.16 | 3.2 annual rents
Own calculation, assumptions as above.
Purchase price and rent of the specific apartment count for your decision; the state average only gives the order of magnitude. The purchase costs for your case are determined by the Purchase Costs Calculator, the yield by the Rental Yield Calculator.
07Rental Rules: Rent Control and Cap on Increases per State
In addition to taxes, the state sets the rules for rent. Two instruments matter for landlords. Rent Control (Mietpreisbremse) limits the rent for a new rental contract to a maximum of 10% above the local comparative rent (§ 556d BGB). The Cap on Increases (Kappungsgrenze) limits rent increases in an ongoing contract to 20% in three years, and in certain municipalities to 15% (§ 558 Para. 3 BGB).
Both apply only where the state government determines it by ordinance. The situation as of 09/29/2026:
- Entire City: Berlin and Hamburg have rent control (until 12/31/2029) and a 15% cap throughout the city area.
- Selected Municipalities: Bavaria (284), Baden-Württemberg (130), Rhineland-Palatinate (99), Lower Saxony (57), North Rhine-Westphalia (57), Hesse (49), and Brandenburg (36). In Saxony, it only applies in Dresden and Leipzig; in Thuringia, in Erfurt and Jena; in Mecklenburg-Vorpommern, in Rostock and Greifswald; in Bremen, only in the city of Bremen.
- No Rent Control: Saarland, Saxony-Anhalt, and Schleswig-Holstein. In Schleswig-Holstein, the reduced cap of 15% still applies in 62 municipalities. In Saarland and Saxony-Anhalt, it remains at 20% everywhere.
Several ordinances end soon: Hesse on 11/25/2026, Baden-Württemberg on 12/31/2026, Saxony on 06/30/2027. State governments have announced or drafted new versions. Check what applies in your municipality before buying. Apartments that were first used and rented after 10/01/2014 are exempt from rent control (§ 556f BGB).
Rent control itself is no reason to avoid a state. It almost always applies where the housing market is tight, meaning vacancy is rare. Those who buy there should not calculate with a rent that lies above the permitted limit.
08Risks When Comparing Federal States
- Average is not location: Every number in the table is a state average. Differences within a state are almost always greater than those between two states.
- Data ages: Vacancy dates from May 2022, purchase prices from 2024. Interest rates and prices have moved since then.
- Rules can change: A new state government can lower the transfer tax or expand rent control.
- Prognoses are not certainty: A shrinking population can be offset by more single-person households.
09Conclusion
There is no "best" state for investment properties, but there is one that fits your strategy. If you seek high stability and demand, states like Bavaria, Baden-Württemberg, or the city-states are suitable, despite high prices. If you focus on high initial yield and lower capital requirements, states in East Germany or parts of NRW and Lower Saxony are worth a look—provided you choose the city and the property very carefully.
The state provides the framework (tax and law), but your success is decided at the local level.
FAQHäufige Fragen
Which federal state is the best for an investment property?
There is no such ranking. States with low vacancy like Hamburg, Berlin, or Schleswig-Holstein have high prices or high transfer taxes. Affordable states like Saxony-Anhalt or Thuringia have more vacant apartments and shrinking populations. Which state fits depends on your budget, equity, and willingness to carry vacancy.
Where should you buy real estate as an investment?
Where purchase price, achievable rent, and demand match. Check the city first: population development, vacancy according to the 2022 census, rent index, and purchase prices from the expert committee. The federal state primarily determines transfer tax and rental rules.
How does the real estate transfer tax differ between states?
Bavaria charges 3.5%. Baden-Württemberg, Lower Saxony, Rhineland-Palatinate, Saxony-Anhalt, and Thuringia charge 5.0%. Brandenburg, North Rhine-Westphalia, Saarland, and Schleswig-Holstein charge 6.5%. For a €250,000 purchase price, that's €8,750 compared to €16,250.
How high is the vacancy rate in the federal states?
According to the 2022 census, 8.9% of apartments in Saxony-Anhalt were vacant, 8.5% in Saxony, and 7.8% in Thuringia. In Hamburg it was 1.9%, in Berlin 2.0%, and in Schleswig-Holstein 2.7%. Nationwide, 4.3% of apartments were vacant.
In which federal states is there no rent control (Mietpreisbremse)?
In Saarland, Saxony-Anhalt, and Schleswig-Holstein (as of Sept 29, 2026). In all other states, it applies in selected municipalities or, like in Berlin and Hamburg, in the entire city area.
Is an apartment in East Germany sensible as an investment?
That depends on the city. In Leipzig, Dresden, Jena, Erfurt, or Rostock, vacancy is significantly below the state average. In many rural districts, however, more than 10% of apartments are empty, and forecasts expect a population decline of 8% to 12% on average by 2040. Low purchase prices there are often the price for this risk.
How up-to-date are the figures?
Transfer tax and rental rules are as of Sept 29, 2026, the unemployment rate as of September 2026. Purchase prices are from 2024, vacancy and average rents from the 2022 census. Newer figures for individual states and cities can be found on the linked state and city pages.