Property bubble in Germany: what the 2026 data shows

Andriy Bezborodko · 2026-10-14

You are thinking about buying a flat, or you already own one. Everywhere you look, you read that prices are too high and the bubble is about to burst. Others write the opposite. Both sides usually have one thing in common: they provide no figures you can check for yourself.

We take the opposite approach. We take the four characteristics economists use to identify a bubble and set them alongside the official time series. You will not find a forecast here. The data shows where the market stands today, not where it will be tomorrow.

01What makes a property bubble

A bubble means more than simply “expensive”. Economists use the term when prices become detached from the factors that should underpin them: rents, incomes and interest rates. This is almost always accompanied by plentiful cheap credit and the expectation that prices will keep rising indefinitely. When a bubble bursts, prices do not merely fall: they fall rapidly and sharply, often accompanied by forced sales.

Four questions are enough for a level-headed assessment.

We will work through these four points in turn.

02Characteristic 1: prices and rents

Germany’s Federal Statistical Office measures residential property prices using the House Price Index. Eurostat publishes the same series for Germany with 2015 as the base year. Alongside it is an index of rents actually paid. Dividing one by the other shows how much a buyer pays for one euro of rent.

From 2010 to 2022, prices almost doubled (+96%), while rents rose by 18% over the same period. In 2022, the price-to-rent ratio was around 66% above its 2010 level. It has since fallen again because prices declined while rents continued to rise. In 2025, it was still around 45% above 2010.

What does that mean? The market has unwound a large part of the excess from the low-interest-rate era, but not all of it. Buyers today pay less relative to rent than in 2022, but more than in 2010.

03Characteristic 2: interest rates and lending

A single figure shows why prices fell from mid-2022 onwards. According to the Bundesbank, in January 2022 a housing loan with an interest rate fixed for 5 to 10 years cost an effective 1.19%. By the end of 2023, the figure was 3.80%, and in August 2026 it was 3.81%.

With the same monthly payment, a buyer today can borrow almost half as much. The subsequent fall in prices is not a sign of a bursting bubble, but the normal response to more expensive borrowing. What is more remarkable is that prices fell by only 12.9%.

One reason lies in the way property is financed in Germany. According to Bundesbank statistics, almost 78% of new housing loans in August 2026 had an interest rate fixed for more than five years. Anyone who fixed their rate for ten years in 2021 will continue paying their old rate until 2031. Forced sales caused by rising mortgage payments, as seen in the US from 2007 onwards, have therefore largely been avoided.

04Characteristic 3: prices after adjusting for inflation

A price increase of 10% is worth little if everything else becomes 10% more expensive at the same time. Once inflation is stripped out, the decline looks considerably larger. In real terms, prices in 2025 were around 16% below their 2022 level.

In real terms, prices today are roughly where they were in the late 2010s. This curve does not show a bubble in the sense of prices soaring ever higher. Nevertheless, the level remains high compared with 2010.

05Characteristic 4: regions

The average conceals a great deal. In the second quarter of 2026, prices for individually owned flats fell slightly in the seven largest cities, while rising in large independent cities outside these metropolitan areas.

Source: Federal Statistical Office, press release No. 336 of 24 September 2026, provisional figures.

One private research institute explicitly measures bubble risk at district level. In the second quarter of 2026, the empirica Bubble Index identified moderate to high risk in 272 out of 400 districts, fewer than at the peak in late 2021. Among the twelve largest cities, empirica classified Hamburg and Bremen as high risk and Dortmund as low risk. Based on the ratio of purchase prices to rents, empirica estimated the nationwide “potential downside” at 18%, compared with 20% a year earlier. This is a model-derived figure, not a forecast.

06What this means for your calculations

You cannot change whether German flats as a whole are overvalued. What you can control is the price of the one flat you buy. And that has a much more direct effect on your financial outcome than any debate about the market.

Let us take two flats of the same size with the same rent, one costing €3,500 and the other €2,800 per square metre. These figures are an illustrative calculation, not a forecast.

Both flats require you to put in money in the first year. That is normal with interest rates of around 3.8% and purchase prices above 20 times the annual rent. Part of the money you contribute goes towards repaying the principal and builds equity. But the difference between A and B is €186 a month, or more than €22,000 over ten years, solely because of the purchase price.

You can calculate the multiple of purchase price to annual rent yourself for any listing. Read more in the glossary entry on the purchase price multiple. For your own flat, use the rental yield calculator.

What does your flat earn relative to its price? Enter the purchase price, purchase costs and rent.

07Who should pay attention to the bubble question

08Risks and limitations of this data

Indices show averages. Your flat may perform differently, even against the trend. The figures for the second quarter of 2026 are provisional; the Federal Statistical Office has just revised the first-quarter figure downwards by 0.2 percentage points.

The price-to-rent ratio tells us nothing about which ratio is “right”. Higher multiples are financially manageable when interest rates are low than when they are high. If interest rates continue to rise, prices may come under pressure; if rates fall, the multiple may rise again.

For you as an owner, the familiar risks of a rental flat remain: vacancy and lost rental income, rising interest rates when refinancing, maintenance and mandatory renovation work. Read more about interest rate risk in the glossary entry on interest rate risk.

09Further reading

• Property prices are falling: buy or wait?
• Property value appreciation: what the data shows
• Rental price trends and the rent index
• Calculating rental yield
• Glossary: fixed-rate period

10Sources

• Federal Statistical Office: Residential property prices in the second quarter of 2026, press release No. 336 of 24 September 2026, destatis.de (accessed 14 October 2026)
• Eurostat: House price index, annual (prc_hpi_a) and quarterly (prc_hpi_q), Germany, 2015 = 100, as at 1 October 2026; HICP annual average indices (prc_hicp_aind), all-items index and CP041 actual rentals for housing, as at 6 February 2026 (accessed 14 October 2026)
• Deutsche Bundesbank: Interest rates and volumes for new business of German banks, housing loans to households, as at 1 October 2026, bundesbank.de (accessed 14 October 2026)
• European Central Bank: Key ECB interest rates, ecb.europa.eu (accessed 14 October 2026)
• Federal Statistical Office: Inflation rate in September 2026, press release No. 348 of 30 September 2026 (accessed 14 October 2026)
• Haufe: Report on the empirica Bubble Index for the second quarter of 2026, dated 11 August 2026, haufe.de (accessed 14 October 2026)

Note: This guide provides general information and does not constitute investment, tax or legal advice. The figures describe the past and are not a forecast.