The German Real Estate Market 2026 | 1

In 2025, the German economy recorded growth of 0.2%, marking its first slightly positive result in two years and formally signaling the end of the recession.

The ifo Business Climate Index stood at 87.6 points in January 2026, unchanged from the previous month. While the current business situation improved in the retail sector and particularly in industry, expectations remained cautious. Uncertainties regarding U.S. tariff policy and pressure for structural reforms are weighing on the economy.

This subdued macroeconomic development is also reflected in the labor market. The average annual unemployment rate rose to 6.3% in 2025, an increase of 0.3 percentage points compared to the previous year. At the beginning of 2026, the unemployment rate climbed further to 6.6%, bringing the number of unemployed in January 2026 to its highest level since 2014.

Inflation in Germany averaged 2.2% in 2025, remaining at the previous year’s level. While service prices increased at an above-average rate, declining energy prices had a dampening effect on inflation.

The European Central Bank’s (ECB) key interest rate remained unchanged at 2.0% in early February 2026. With inflation in the eurozone within the ECB’s 2% target range, no interest rate moves are expected in the short term. Long-term government bond yields have edged up slightly, driven by expectations of rising government debt. In the coming months, we expect yields to stabilize at current levels.

Geopolitical risks and trade policy uncertainties are likely to persist in the near term. At the same time, new EU free trade agreements with Mercosur countries and India open up additional opportunities for export-oriented companies in the medium term. For 2026 and especially 2027, we expect a gradual economic recovery, provided that the announced government investments are actually implemented. For 2026, we anticipate gross domestic product to grow by approximately 1.0%, while inflation is likely to increase slightly to around 2.3%.