Following signs of a slight recovery in 2025, the German property sector is seeing a noticeable downturn in sentiment in the first quarter of 2026. This is shown by the latest ZIA-IW Property Sentiment Index (ISI). “The shaky foundations of the property market’s recovery are once again being hampered by geopolitical crises and rising energy prices.”

“Further proposals to tighten rent controls come at an inopportune time,” said ZIA President Iris Schöberl, commenting on the key findings of the survey. The assessment of the current business situation rose slightly by 1.7 points to 14.5, although expectations fell more significantly by 3.7 points to 16.4. The overall climate has deteriorated by 1.0 points compared with the fourth quarter of 2025 and now stands almost 10 points below the figure for the summer of 2025.

Whilst the office market remains robust, the residential property sector and property development in particular have been severely affected by the current geopolitical and economic challenges. The property sector is adopting a cautious and reserved stance in its outlook for the coming quarters.

The results for the individual segments:

• Office property: The office segment is the only one in which both the current business situation and future expectations have improved. The assessment of the current situation rose by 3.1 points to 20.0, whilst expectations increased by 6.7 points to 26.7. The property climate stands at 23.3 points (up 4.9). This is due to the continued robustness of the services sector and the trend among many companies to increase the number of days staff spend in the office again.

• Residential property: The business situation rises slightly by 1.1 points to 18.2, but expectations fall sharply from 10.1 to 5.8. The property climate has fallen to 11.9 points, reaching its lowest level since summer 2024. The planned tightening of rent controls and the sharp rise in energy prices following the war in Iran are having a particularly negative impact.
• Project development: The situation is particularly tense. The business climate has fallen by 25.5 points to –23.5, whilst expectations have dropped by 12.3 points to 8.8. Despite rising building permit figures and improved funding conditions, the profitability of many property developers remains limited due to high insolvency rates and insufficient demand. The property climate stands at –8.0 points, the sharpest decline of all segments.

“The results show that unless policymakers take decisive action with structural reforms, the situation on the housing market threatens to worsen dramatically – and this in a context where conditions in metropolitan regions are already extremely strained,” warns Schöberl.

Details on the sentiment index can be found here: ZIA-IW Real Estate Sentiment Index

Background: The survey for the ISI took place from 12 February to 9 March 2026, with the start of the Iran war on 28 February falling within the survey period. Against this backdrop, companies are assessing the future business outlook with scepticism and continuing the trend of increasing caution observed since summer 2025.

The Real Estate Sentiment Index has been compiled by the German Economic Institute (IW) in cooperation with the ZIA since 2020. The aim is to gather up-to-date information on the situation and expectations of property investors and project developers, thereby further improving market transparency. The survey is conducted every quarter.

Source: DEAL Magazine