SKG Real Estate Management
Market
The German residential market after the interest rate shock – and why North Rhine-Westphalia is our focus.
Market environment
A market in transition – and attractive precisely because of it
The interest rate shock of 2022/23 has brought about a correction in the German real estate market. Capital has withdrawn and new construction has collapsed – yet demand for housing has remained.
Market correction
The rise in the ECB key interest rate from −0.50% to +4.00% has slowed transactions, planning applications and project developments. Many developers have had to restructure, and transaction volumes remain below pre-2022 levels.
Capital and supply gap
Institutional capital and traditional lenders have withdrawn. At the same time, Germany is short of around half a million homes – equity for recapitalisations is scarce and in demand.
Solid fundamentals
Rents and occupancy rates have remained stable in the core markets. In most cities, the rent burden is well below the critical threshold of one third of disposable income.
Transaction volume since 2023 around two thirds below 2020/21
Commercial real estate in Germany per quarter, in € bn
Source: JLL, Investment Market Overview Q4 2025
Residential yields have risen significantly for the first time in over 20 years
Net initial yield, residential, top 7 cities
Source: DZ HYP / bulwiengesa
Regional focus
North Rhine-Westphalia: largest rental market, best affordability
NRW lies at the heart of Europe’s “Blue Banana”, with high purchasing power, a dense corporate landscape and more major cities and students than any other German federal state. In addition, we invest in selected university cities and state capitals in western and southern Germany as well as in Austria.
17.9m
inhabitants – NRW is Germany’s most populous federal state.
10 of 20
of Germany’s largest cities are located in NRW.
8 of 20
of the largest universities by student numbers.
€28,917
purchasing power per capita (2025) compared with an EU average of €20,291.
15–16%
of tenant households in NRW receive housing benefit (Wohngeld) or have their housing costs covered by the state (Kosten der Unterkunft) – de facto public backing for rent payments.
NRW cities around 7 percentage points more affordable than the top 7
Rent-to-income ratio: share of household income spent on the gross rent of a newly let 95 m² flat
Source: Colliers, Wohnungsmarkt Deutschland 2025/2026; own analysis. As of H1 2025
Focus regions
Presence in the growth regions of western and southern Germany
- Ruhr areaDense rental market with high affordability
- RhinelandEconomic region with strong purchasing power
- Euregio Meuse-RhineUniversity and technology region where three countries meet
- Rhine-MainEconomic region with international demand
- Upper BavariaHousing market with a high level of excess demand
Schematic representation, without property locations.