While the overall economic situation remains challenging, the property markets in the DACH region and beyond are showing the first signs of stabilisation, says the The Empira Group in its latest research 'Economy & Real Estate – Quarterly View 2025 / Q1'. 

Residential property prices in Germany's top seven cities show a mixed trend: while Frankfurt am Main is up 3.2%, Düsseldorf is down 2.9% (Q3 2024 compared to the previous year).

Rents continue to rise, especially in Frankfurt am Main (+7.9%). The excess demand is being exacerbated by the ongoing decline in new construction.

The investment volume in residential portfolios recovered significantly to €9.3bn in 2024 (+78% compared to 2023) but remains below the long-term average.

Lahcen Knapp (pictured), chairman of the board of directors of the Empira Group said: "The market is adapting. While rising rents and stabilising prices are opening new opportunities for investors, new construction activity remains a challenge. Growing demand meets limited supply - a driver for rental growth in the coming years."

Growing excess demand due to a decline in new construction

Construction activity remains at a historic low:

• Germany: Building permits in 2024 are down -22% on the previous year

• Austria: Only 24,300 residential units are expected to be completed in 2025 (2023: 43,410)

• Switzerland: Vacancy rates fall further, approvals at an all-time low

As the number of completions continues to lag behind demand, rental price growth will continue, particularly in sought-after metropolises.

Interest rate development as a catalyst for the market

The central banks made their first interest rate cuts in the second half of 2024:

• ECB: Key interest rate currently at 2.75%, further cuts expected in 2025

• Fed: cut to 4.5 %, uncertain forecast due to new government policy

• Switzerland: key interest rate at 0.5%, stable franc supports exports

Falling financing costs could gradually revive the property market and ensure a return of institutional investors.

Outlook: Market opportunities for institutional investors

While the overall economic environment remains in a state of upheaval, new investment opportunities are emerging. Rental markets with strong excess demand and real estate debt in particular offer attractive prospects.

"Investors benefit from a market adjustment that brings both opportunities and challenges. A selective investment strategy remains crucial to optimise positioning," concluded Knapp.