Macroeconomics: Key Indicators 2026

Monetary Policy & Yields

The cost of a Berlin mortgage does not take shape only at the bank's counter but is priced in the capital markets first, with two figures carrying most of the weight. The policy rate decisions of the European Central Bank determine the terms on which banks themselves can source funding, while the yield on the ten-year German government bond serves as the reference against which banks set their long-term mortgage rates.

ECB Key Interest Rates

Following its tightening cycle from 2022 to mid-2024, the ECB lowered its deposit rate through eight steps from 4.00% to 2.00% by June 2025 and has held rates at that level ever since. The ECB steers monetary policy through three key interest rates, and in the current environment it is the deposit rate that does the steering, because banks in the euro area hold more central bank money than they need and place the surplus with the ECB at this rate. The main refinancing rate, at which banks can obtain fresh central bank money from the ECB once a week for a seven-day period, currently stands at 2.15 %, reflecting an adjustment of -0.50 % over the past twelve months. The deposit rate, at which banks park their surplus liquidity with the ECB and which therefore forms the floor of money market rates, stands at 2.00 %, while the marginal lending rate used by banks for very short-term overnight borrowing from the ECB is at 2.40 %.

German Mortgage Rates

German mortgage rates follow primarily the yield on the ten-year Bund, as banks price their long-term residential lending against this market rate and movements at the Bund curve feed through to mortgage conditions with a lag of three to six months. While the ECB has kept its policy rates on hold since June 2025, the ten-year Bund yield has widened by around 50 basis points over the same period. Because mortgage rates track the Bund yield more closely than the ECB policy rate, mortgage conditions have tightened modestly since mid-2025, regardless of the fact that the ECB itself has taken no further rate steps. The ten-year Bund currently yields 3.01 % (0.47 % year on year), the fifteen-year Bund 3.35 % (0.49 % year on year) and the thirty-year Bund 3.53 % (0.58 % year on year).

Economy & Labor Market

Economic activity, inflation and employment feed into the Berlin real estate market through purchasing power and buyer risk appetite, but they set the frame rather than the trajectory. The underlying dynamic derives from inward migration, constrained supply and regulation, and regularly diverges from the national average.

Gross Domestic Product (GDP)

The German economy has effectively been moving sideways since the beginning of 2022 and contracted mildly in 2023 and 2024. A tentative recovery has emerged since early 2025, yet it remains within a range of 0.3 to 0.5 percent annual growth and sits well below the medium-term potential rate. For Berlin, this national backdrop matters less than for more industrial regions, as residential demand in the city is driven primarily by inward migration, household formation and supply constraints rather than by the national economic cycle.

GDP growth currently stands at 0.4 % year on year, with a seasonally and calendar-adjusted quarter-on-quarter change of 0.3 %.

Inflation Rate

After running close to the ECB's two percent target for most of 2025, headline HICP inflation in Germany jumped back to 2.8 percent in March 2026. The move is driven by the energy price response to the Iran conflict, which pushed the energy component of the HICP from a year-on-year decline of 2.3 percent to a gain of 6.3 percent within a single month. Core inflation excluding energy and food has remained in a narrow band around 2.5 percent for several months and continues to sit above the ECB target, which, alongside the geopolitical risks, is the more fundamental reason for the ECB's current hold.

Headline inflation as measured by the Harmonised Index of Consumer Prices, which the ECB uses as the reference for its two percent target, currently stands at 2.8 % year on year. Core inflation excluding energy and food is 2.5 %, the energy component records a year-on-year change of 6.3 %, and rents within the HICP show a year-on-year change of 2.2 %.

Labor Market

The German labour market has cooled visibly since late 2024. The unemployment rate has risen to 6.3 percent, the number of unemployed has increased by around 100,000 year on year, and the number of persons in employment has declined for the first time since the pandemic. At the same time, participation in short-time work schemes has roughly halved year on year, which suggests that industry is now adjusting to weak demand through permanent job cuts rather than reduced working hours. Berlin's unemployment rate traditionally sits above the national average, although the city's employment base skews more heavily towards services and public administration and is therefore less exposed to the ongoing industrial downturn than the manufacturing regions of southern Germany.

Germany's unemployment rate currently stands at 6.3 %, covering 2,977,000 persons registered unemployed, which corresponds to a year-on-year change in the rate of 0.1 %. The number of employees subject to social insurance contributions is 34,902,000 persons, while the number of workers on short-time schemes is 122,217 persons.

Financing & Credit Flow

Since the 2022 rate turn, Germany's residential financing market has settled into a new equilibrium. Monthly new lending sits well below the pre-turn peak but has stabilised since mid-2025, while construction costs continue to rise by around four percent a year despite the downturn in new-build activity.

Housing Loans (Interest Rates & Volume)

Monthly new mortgage lending by German banks currently runs at around eight billion euros, roughly half the level seen in 2021 and 2022 when the monthly peaks clearly exceeded twelve billion euros. After the sharp contraction in 2023 and 2024, new business has stabilised since mid-2025 at its current level, which suggests that price adjustment in the residential market is now working primarily through property prices rather than through financing costs. In the current rate structure, variable rate loans with a term of up to one year sit at around four percent and therefore above loans with a fixation of ten years or more at 3.6 percent, which reflects the market's expectation that the ECB will keep policy rates broadly unchanged in the coming years. In Berlin, the new-build segment has cooled visibly in response to the higher funding costs, as reflected in the decline of building permit volumes and in the insolvency of several larger project developers.

The average interest rate on new mortgage lending currently stands at 3.62 %, new business volume amounts to €8,193,000,000, and has changed by 0.2 % year on year. Loans with a fixation of one to five years are priced at 3.50 %, loans with a fixation of more than ten years at 3.63 %.

Construction Costs

Construction costs for residential buildings in Germany have risen continuously since the mid-2010s and now sit around 36 percent above the 2015 level. On a year-on-year basis, building a residential property remains around four percent more expensive, even though German new-build activity is markedly weak and a normal supply and demand pattern would point to falling rather than rising construction prices. The dynamic is driven primarily by labour costs in the construction trades and by persistently elevated material and energy costs, which means that a meaningful easing on the cost side is unlikely to materialise in the medium term. For the Berlin market, this implies that new residential units can only be built profitably where sale prices in the new-build segment sit at a level that absorbs current construction costs, which reinforces the structural shortage of new housing in the city.

The construction price index for residential buildings shows a year-on-year change of 3.3 %, and a quarter-on-quarter change of 0.5 %.

Property Prices

Following the price correction of 2023 and 2024, Germany's nationwide residential price indices are showing a broad-based upward movement again across 2025. The pace, however, differs clearly by market segment and by region. At the national level, apartment buildings as investment assets are rising noticeably faster than owner-occupied residential property, and the top metropolitan markets including Berlin are lagging the national average in the recovery of owner-occupied apartment prices. In Berlin's apartment-building segment the national catch-up dynamic has likewise not yet set in, which currently offers investors entry prices below the national recovery path.

Price Indices for Apartments & Rental Properties

For the national benchmark, this report draws on the price indices published by Destatis, vdpResearch and Hypoport, which each cover a slightly different slice of the market and move in the same direction while differing by a few percentage points in absolute terms.

After the price run-up of 2020 to 2022, the correction of four to eight percent in 2023 and a slightly negative movement in 2024, all three providers have been showing positive year-on-year changes again since the start of 2025. The top seven metropolitan markets including Berlin lost more ground during the correction and are recovering more slowly, so that the national index stands at 2.6 percent in 2025 while the top seven index gains around one percent, with the price picture within Berlin itself continuing to differentiate across boroughs and districts.

• Top 7 major cities: 1.0 % in prices and 17.2 % in transactions
• Top 127 cities: -0.1 % in prices and 20.9 % in transactions
• Districts and independent cities: 1.3 % in prices and 25.1 % in transactions

Sources

All statistical time series on this page are sourced through the SDMX API of the Deutsche Bundesbank. The Bundesbank acts as an aggregator; the primary source depends on the indicator and is either the European Central Bank, the Federal Statistical Office of Germany (Destatis), the Federal Employment Agency, or a private index provider (vdpResearch, Hypoport). The SDMX codes in parentheses identify the respective time series family in the Bundesbank API.

• ECB key interest rates (SDMX BBIN1)
• German government bond yields (SDMX BBSSY)
• Gross domestic product (SDMX BBNZ1)
• Harmonised Index of Consumer Prices (SDMX BBDP1)
• Unemployment (SDMX BBDL1)
• Employment (SDMX BBDL1)
• Housing loans: effective interest rates and volumes (SDMX BBIM1)
• Construction price index for residential buildings (SDMX BBDP1)
• Price indices for apartments (SDMX BBDY1)
• Transaction indices for apartments (SDMX BBDY1)
• Price indices for apartment buildings (SDMX BBDY1)
• Deutsche Bundesbank projection (macroeconomic projections, published semi-annually in the Monthly Report)
• Annual projection of the German Federal Government (Federal Ministry for Economic Affairs and Energy, Annual Economic Report)