Property capital growth: what the past 5, 10 and 20 years show

Michael Pauker · 2026-10-14

You bought a few years ago and are wondering what your flat is worth today. Or perhaps you are currently running the numbers on a property, and the calculation assumes capital growth of 2% a year. Does that sound realistic?

The answer depends heavily on which period you look at, whether you adjust for inflation and whether you factor in costs and tax. We show all three levels using the official House Price Index. This is a look back. None of these figures tells us how prices will develop in future.

01What the official index shows

The House Price Index measures the prices of all residential properties sold: flats and houses, both new builds and existing properties. It adjusts for differences in size, location and specification. This makes it more useful than average asking prices in listings for comparing developments over the years.

The table already highlights the fundamental problem with any figure for “average capital growth”. Depending on where you start, the results vary considerably. Someone who bought in 2005 first experienced five years of stagnation, followed by a long rise. Someone who bought in 2020 has lost purchasing power after inflation.

02After inflation

Part of any increase in value reflects the falling purchasing power of money. If a flat is worth 10% more, but everything else also costs 10% more, you have gained nothing in real terms. From 2015 to 2025, consumer prices rose by 31.9%. The 52.7% increase in property values therefore amounts to 15.8% in real terms.

The calculation can also turn negative. Between 2020 and 2025, house prices rose by 10.1%, while consumer prices rose by 24.7%. In real terms, property values fell by 11.7% over those five years. During this period, property did not work as a hedge against inflation, at least not through its value. Read more in our guide to protection against inflation through tangible assets.

03Year by year: not a straight line

Averages smooth out what happens in between. From 2016 to 2022, prices rose each year by between 6% and almost 12%. Two years of falling prices followed, with a decline of −8.4% in 2023, the steepest annual fall since 2005.

For you, this means that the timing of your purchase makes a substantial difference over five or ten years. Over very long periods, this is more likely to even out, but there is no guarantee. The latest figures show that prices rose by 0.6% year on year in the second quarter of 2026.

04New builds and existing properties

Since 2022, new and existing properties have followed different paths. Existing property prices have fallen significantly, while new-build prices have barely declined. One important reason is construction costs: developers cannot sell below these without making a loss.

Source: Eurostat, House Price Index for Germany, quarterly figures, as at 1 October 2026. New builds peaked in the third quarter of 2022; existing properties and the overall index peaked in the second quarter of 2022.

This does not provide grounds for recommending one over the other. It does show, however, that “property” is not a single, uniform market. You can compare both approaches in our guide to new-build or existing property as an investment. Figures also vary widely by region, as our guide to the property bubble in Germany shows.

05What remains after costs

The index shows prices, not your profit. When buying, you pay property transfer tax, notary fees and land registry fees, and often estate agent fees too. Depending on the federal state and the agent’s commission, these total around 5% to 12% of the purchase price. Selling brings further costs. And a flat ages: without ongoing maintenance, it will not keep pace with the index.

Two examples show the range of outcomes. Both flats perform exactly in line with the average; the figures are illustrative calculations, not forecasts.

In the first example, just over €76,000 remains in nominal terms, but only around €6,000 in real terms after inflation. In the second, there is a shortfall of just over €63,000 after four years. For a rental flat, rental income, interest, loan repayments and tax effects also come into play. These often have more influence on the outcome than the property’s value.

06Capital growth and tax

If you sell a rental flat within ten years of buying it, the gain is taxable as a private disposal transaction (§ 23 Abs. 1 Satz 1 Nr. 1 EStG). Depreciation already claimed is deducted from the purchase price, meaning that the taxable gain is higher than the increase in value alone (§ 23 Abs. 3 Satz 4 EStG). After ten years, the gain is tax-free.

An example using hypothetical figures: Lena is single and has a taxable income of €60,000. She sells after eight years with a taxable gain of €30,000.

Of the €30,000 gain, Lena would retain around €16,800 after tax. Had she waited just over two years longer, the gain would have been tax-free. Use the property disposal tax calculator to calculate your own case; details are set out in our guide to the ten-year holding period for property sales.

How much tax is payable on a sale before the ten-year period has expired? Enter the purchase date, purchase price, depreciation and sale price.

07Who relies heavily on capital growth?

08Risks and limitations

The House Price Index is a nationwide average. Your flat may perform better or worse depending on its location, condition, energy rating and the community of owners in the building. The figures for the latest quarter are provisional and are regularly revised.

Past capital growth is no basis for future growth. The years from 2010 to 2021 saw falling and then extremely low interest rates, which may not return in the same way. Rising interest rates, void periods, mandatory renovation work and weaker demand in a region can depress values.

09Further reading

• Property bubble in Germany: what the data shows
• Falling property prices: buy or wait?
• The ten-year holding period for property sales
• Property or ETFs: a fair comparison
• Glossary: market value

10Sources

• Eurostat: House price index, annual (prc_hpi_a) and quarterly (prc_hpi_q), Germany, 2015 = 100, as at 1 October 2026 (accessed 14 October 2026)
• Eurostat: HICP annual average indices (prc_hicp_aind), Germany, as at 6 February 2026 (accessed 14 October 2026)
• Federal Statistical Office: Residential property prices in the second quarter of 2026, press release No. 336 of 24 September 2026 (accessed 14 October 2026)
• § 23 EStG, § 32a EStG, §§ 3, 4 SolZG, gesetze-im-internet.de (accessed 14 October 2026)

Note: This guide provides general information and is not a substitute for tax or legal advice. The figures describe the past and are not a forecast.