Germany’s housing sector remains under pressure from costly construction and weak homebuilding, even though residential property prices have returned to annual growth. In the UK, house-price inflation has slowed and a survey-based indicator points to stabilisation—but the signal is mixed and regional differences are sharp. The comparison is about supply conditions in Germany and a tentative shift in the UK, not a simple contrast between falling and rising national prices.
What is happening to house prices in Germany and the UK?
German residential property prices rose 3.2% in 2025 after falling in 2023 and 2024. In the second quarter of 2026, they were 0.6% higher than a year earlier and 0.3% higher than in the previous quarter, according to Destatis. The index was rebased to 2025 in June 2026 and includes methodological updates; the latest observations are subject to revision.
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In the UK, the provisional June 2026 house-price estimate put annual inflation at 2.0%, down from a revised 3.0% in May, with the average price at £272,000. Prices rose 0.1% month on month without seasonal adjustment but fell 0.2% on a seasonally adjusted basis. The slowdown in the annual rate partly reflects weaker early-summer growth than in the same period of 2025, according to the UK House Price Index summary.
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Why Germany’s housing sector is still under strain
Homebuilding remains far below its recent peak
The European Commission’s 2026 assessment says housing construction in Germany had fallen by more than 20% in real terms since 2020, citing high construction costs and higher interest rates. It reports 238,400 housing permits in 2025, 10.8% more than in 2024 but 37% below the 2021 level. A rise in permits is an improvement in the pipeline, not a count of completed homes: projects may take time to build or may not proceed.
Construction costs are rising from an already high level
Destatis reported that residential building construction prices in Germany were 5.0% higher in May 2026 than in May 2025. This measures construction prices, not the selling price of existing homes. Separately, the Commission put German housing-construction costs in 2024 at 147% of the EU average. That is a comparison of price levels, not a year-on-year inflation rate. Together, the figures help explain why a recovery in permits has not quickly translated into abundant new housing.
The Commission also notes that estimates of Germany’s housing shortage differ considerably. No single shortage estimate should be treated as an uncontested count.
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The official UK release reported that the Royal Institution of Chartered Surveyors’ June 2026 Residential Market Survey found signs of stabilisation in its headline house-price indicator. That is a survey signal, distinct from the official index of recorded house prices. The same release said June mortgage approvals were below their average for the preceding six months, so the market indicators do not point uniformly toward a strong rebound.
Regional outcomes also diverged in June 2026: annual prices rose 4.7% in the North West and fell 2.5% in London. A national average therefore masks materially different local conditions for buyers, sellers and builders.
RICS’s February 2026 update had earlier described buyer enquiries and newly agreed sales as appearing to stabilise, while noting local variation. That earlier survey is useful context, but it is not a substitute for the newer June official price figures.
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What the comparison means for housing supply and affordability
Germany’s main warning is that a modest return to price growth does not resolve the difficulty of delivering homes. Construction costs, interest rates and a building pipeline still well below its 2021 permit level put pressure on supply. The UK’s slower price inflation and survey-based stabilisation suggest a less forceful price-growth picture, but neither establishes that homes are broadly affordable or that activity is strengthening everywhere.
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Rent experience also depends on whether a household already holds a lease or is trying to move. The Commission reports that in Germany from 2013 to 2024, rents for existing contracts rose 18.6%, below inflation of 30.1% and disposable-income growth of 44.8%. New-contract rents rose 50.8% nationally and 76.3% in the country’s seven largest cities over the same period. The sharper increase for new lets shows why aggregate rent trends can understate the cost facing people entering or moving within the market.
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How to read the indicators without overclaiming
- Separate prices from construction: house-price indices show what homes cost in transactions; building-price indices measure construction costs.
- Distinguish pipeline from delivery: permits indicate authorisation, not completed homes.
- Keep survey signals in context: RICS’s stabilisation wording describes survey sentiment, not a guaranteed turning point in official prices.
- Check geography: national averages can conceal strong differences between regions and cities.
- Align dates and definitions: the German construction and price figures and the UK price and survey indicators measure different things over different periods.
The Bundesbank’s housing indicator system likewise treats prices, financing and the real economy as complementary ways to assess the market, rather than relying on one headline series: Bundesbank housing-market indicators.
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