What trends are emerging in prices and interest rates? In which regions is the demand for houses and apartments high? What will property buyers expect in 2025? Discover the key developments that will be relevant for you when selling a property in 2025.
After a downward trend lasting almost two years, the residential real estate market will experience an upturn in 2024. According to a residential barometer for the third quarter of 2024, demand has risen noticeably. In major cities, demand rose by 28% and in the surrounding areas by 22% compared to the previous year. Another positive factor for the purchase market is the further reduction in interest rates by the European Central Bank. Accordingly, asking prices have remained stable and are already showing an upward trend in some major cities. The market sees the current environment as a favorable time to buy, as prices are expected to rise even more sharply in the future.
As a property seller in 2025, you should not only consider price developments, but also trends in building interest rates. The sharp rise in interest rates since 2022 has made it difficult for many potential buyers to obtain financing despite lower property prices.
By the end of 2024, however, construction interest rates had stabilized and were around the three percent mark for ten-year loans. For the first few months of 2025, they are expected to settle between 3.0% and 3.5%. However, the forecast for the medium-term interest rate trend remains uncertain due to global uncertainties, such as the renewed presidency of Donald Trump in the USA, ongoing conflicts in Ukraine and the Middle East and upcoming new elections in Germany.
Sales tip: Take advantage of this phase of uncertainty! Many buyers are keen to secure the currently favorable loan conditions before interest rates rise again. By putting your Building interest rate trends and buying interest in 2025 property on the market at the beginning of 2025, you can benefit from this situation.
Demand for housing remains high, particularly in urban centers, while the supply of new construction is falling short of expectations. Although the German government has set a target of creating 400,000 new homes per year, it is likely that only just over half of this figure will have been completed by 2024. The number of building permits issued for single-family homes also fell. Shortly before a possible coalition break, the German government passed the Building Type E Act, which is intended to promote more cost-efficient and simplified construction. However, it remains to be seen whether this law will be ratified during the current legislative period.
In the past, location was considered the decisive factor when buying a property, but today energy efficiency is playing an increasingly dominant role on the real estate market. Sellers of existing properties should be aware of this: Properties with low energy efficiency are often ruled out by potential buyers from the outset. According to an analysis by the Kiel Institute for the World Economy, there are significant price differences based on energy efficiency classes: Class A+ and A condominiums fetch an average of 650 euros more per square meter than those in classes D and E. In view of rising energy prices, this discrepancy is likely to increase. The increase in the CO₂ price on fossil fuels from 45 euros to 55 euros per tonne at the turn of 2025 and the rise in gas grid fees, which will lead to additional costs of around 80 euros for an annual consumption of 20,000 kWh, will reinforce the trend towards energy-efficient properties and make them even more attractive for buyers.
The KfW funding program “Young buys old”, which was introduced in September 2024, aims to make unrenovated properties more attractive to buyers by offering low-interest loans of up to 150,000 euros. This program is aimed at families who do not exceed certain income limits and commit to renovating the property. However, the response to the program has so far been subdued, partly due to the strict requirements. In addition, since the end of the traffic light government, the future funding of this scheme in 2025 is uncertain.
If the property you want to sell is in need of improvement in terms of energy efficiency, a refurbishment prior to sale could make sense in order to significantly increase the value and facilitate marketing. However, caution is advised when deciding to refurbish, as the future of government funding programs for refurbishments is also uncertain for 2025 due to the unclear budget situation.
When selling a property, the presentation of an energy certificate is not only mandatory, but also an important selling point that must be mentioned in the property advertisement. As the owner, you can choose between two types of energy certificate: The consumption certificate, which is based on the actual energy consumption data of the last occupants and is available for as little as 50 euros, and the demand certificate, which assesses the energy status of the property. The latter is created by an on-site inspection by experts and costs between 300 and 500 euros for a detached house, but offers a much more precise assessment.
A study by the Kiel Institute for the World Economy (IfW) shows that properties with demonstrable energy efficiency improvements achieve higher prices, especially if they are documented by a certificate of need. This trend is expected to continue in 2025, which underlines the importance of a meaningful energy performance certificate.
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