The German Real Estate Market 2026 | 3
Contents
Key figures
+0.8%
Real GDP, 2026 forecast
+2.7%
Inflation, 2026 forecast
3.8%
Interest rate for new residential construction loans to private households (term >5 years, June 2026)
Background
The German economy grew slightly in the second quarter of 2026 despite the challenging environment. Price-adjusted gross domestic product (GDP) rose by 0.2% compared with the previous quarter, with exports a particular driver of growth. At the same time, the recent pickup in industrial orders pointed to some stabilization, although pull-forward effects likely played a role as well.
Sentiment indicators have also improved again recently. The ifo Business Climate Index rose for the third consecutive month in July 2026, reaching 86.6 points – 0.9 points higher than the previous month. While companies’ expectations for the coming months improved, their assessment of the current business situation worsened. Overall, however, the economic situation remains tense. In the industrial sector in particular, restructuring and announced job cuts are clouding the outlook. Labor market momentum is also still subdued. The unemployment rate increased by 0.2 percentage points to 6.4% in July 2026 due to seasonal factors.
Inflation rose to 2.8% in July 2026, once again driven by higher energy rates and ongoing price increases in the services sector. For 2026 as a whole, we expect an average inflation rate of 2.7%.
The European Central Bank (ECB) left key interest rates unchanged in July 2026. Inflation trends will remain a key factor in determining the future course of monetary policy, as geopolitical risks and their potential impact on energy prices continue to create uncertainty. Should inflationary pressures intensify again, further monetary tightening after the summer break cannot be ruled out.
Overall, the economic environment remains fragile. Positive momentum is likely to come primarily from the federal government’s announced investments in infrastructure and defense. However, geopolitical conflicts, trade policy uncertainties, and increasing competitive pressure are weighing on growth prospects. Against this backdrop, we expect economic growth of 0.8% for the full year. For 2027, we anticipate a slight improvement in GDP to 0.9%.
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