However, it is not the nationwide trend that is decisive. Local development is much more important: While real estate is becoming more expensive in many cities, prices in other regions are stagnating or even falling.

Prices are rising again – but much more slowly

After the interest rate turnaround in 2022, real estate prices initially fell or stagnated. The market has now stabilized.

According to the IW forecast, the average price per square meter will rise from around 3,000 euros in 2025 to around 4,100 euros in 2035. In real terms, this only corresponds to a good one percent growth per year.

The 2022 level could be reached again as early as 2027. However, the sharp price jumps from the low interest rate phase are not occurring.

The economic situation also plays a role. Income and jobs develop differently across regions.

Added to this is the structural change: In In regions with a lot of industry or automotive suppliers, the switch to climate-neutral production causes uncertainty. This can temporarily slow demand for real estate.

This is how prices for residential real estate will change until 2035

Real price change per year in the period 2025 to 2035 according to IW calculations

Prices are particularly rising here

In the long term, regions with growth and jobs will particularly benefit. The IW experts summarize accordingly:

“The big ones are on the winning side Metropolitan regions such as Hamburg, Berlin or Frankfurt as well as their well-connected surrounding areas. In Bavaria and Baden-Württemberg also benefit from more rural districts – the strongest regions are growing by more than two percent per year.”

• large metropolitan areas
• economically strong cities
• well-connected surrounding areas

People continue to move there – demand remains high.

What is striking is that Munich itself is not in the top group heard – “but almost that entire surrounding area the Bavarian capital”.

In North Rhine-Westphalia is Cologne the only city for which the forecast shows significant growth.

Here prices stagnate or fall

The situation is different in structurally weaker regions, “for example large parts of East Germany away from the metropolises, that Saarlandrural districts in Rhineland-Palatinate and the Ruhr area”say the economists. The experts there expect weaker development or even falling prices:

• Regions with population decline
• economically weaker areas
• remote rural areas

Fewer residents mean less demand – which pushes prices down in the long term.

“In the hardest hit regions, such as the Erzgebirgskreis, the Vulkaneifel or Kronachreal estate will almost be by 2035 a fifth of their value lose. Districts with automotive or energy-intensive industries such as Zwickau are also under pressure.”

What this means for buyers and owners

The choice of location is becoming increasingly important for buyers. In strong regions, real estate remains in demand and can continue to increase in value.

In weaker regions, however, the risk that real estate will lose value increases.

This also has consequences for politics: a lack of housing remains a problem in growing regions. In shrinking regions it is more about vacancies and adjusting the inventory.