Building costs and regulation. A study by the Institut der deutschen Wirtschaft compared Germany with the Netherlands and found that German building costs have climbed by over one‑third between 2007 and 2017, whereas Dutch costs only rose by ~6 %. The researchers attribute this to the Netherlands’ goal‑oriented building code; rather than prescribing thousands of detailed norms, it sets broad energy or safety targets and allows planners flexibility. Germany, by contrast, has more than 3 300 relevant building standards and additional state and municipal requirements. As a result, the Netherlands can construct homes more cheaply, easing affordability

Tax policy & housing allowances. Dutch households benefit from a mortgage‑interest deduction and targeted housing allowances, whereas Germany has cut back its tax subsidies. The Dutch government also invests heavily in social housing (around a third of the housing stock), while Germany’s share of social housing has fallen for years. These differences – lower construction costs and proactive tax policies – make Dutch housing generally more affordable than in Germany and illustrate how government policy can directly influence housing costs.

National picture. Buying a home became more expensive again in 2025; residential property prices rose by about 3.3 % in 2025, outpacing consumer-price inflation. Condominiums were 3.8 % more expensive in the last quarter of 2025 than at the end of 2024, while prices for single‑ and two‑family houses actually fell 0.9 % in the same quarter. The IW attributes the soft finish to rising interest rates and the pressure on sellers to close deals before year‑end

Regional differences. Price growth varied widely. The IW notes that Dortmund, Cologne, Düsseldorf and Essen saw the sharpest increases among the ten largest cities, while Hamburg and Leipzig also recorded noticeable rises. Frankfurt and Berlin showed much lower growth in Q4.

Rents rise even faster. New‑contract rents increased 4.1 % nationally over the year, so the IW sees no sign of easing in rental markets. Cologne (+7.6 %), Leipzig (+5.9 %), and Hamburg (+5.4 %) posted the highest rent increases

Because demand remains high and supply scarce, researchers expect continued pressure on tenants and recommend expanding supply through faster planning and permitting, more new construction and better land activation

Permits and orders are ticking up. After years of decline, the number of building permits has been increasing since mid‑2025, and the construction sector recently reported a higher inflow of orders in the building sector. Klaus Wohlrabe of the ifo‑Institute sees a “silver lining on the horizon” and suggests the trough in residential construction may have been passed.

Government initiatives. The report highlights several policy efforts to boost supply: the new “Bau‑Turbo” law to simplify and speed up building permits; plans to invest €23.5 billion between 2025 and 2029 in social housing and “Junges Wohnen” programmes; and discussions about “Gebäudetyp E”, a simplified building standard intended to allow more experimental and low‑cost construction. There is also pressure to revise DIN norms and lower regulatory hurdles, echoing the lessons from the Netherlands.

Challenges persist. Despite the uptick in orders, construction companies still cite high interest rates and burdensome regulations as deterrents. Even with more permits, the report cautions that it takes time to turn approvals into finished homes, so shortages will persist in the near term.

No profit motive. The BGH ruled that a tenant may not earn a profit from subletting; subletting is only permitted to cover the tenant’s housing costs.

Case details. In the case at hand, a Berlin tenant rented his furnished 65‑m² apartment for €962 per month while paying only €460 himself. The landlord terminated the lease, and the courts ruled in her favour; the BGH confirmed the eviction, noting that subletting is not intended as a business.

Furniture surcharge rules to come. The tenant argued that the high sub‑rent reflected the value of the furniture and equipment he provided. The German Tenants’ Association confirmed that there are currently no clear rules for calculating furniture surcharges, and the Federal Justice Ministry plans to introduce statutory guidelines.