Residential Real Estate

Market Sentiment and Trends

Current developments in the residential real estate market are characterized by increasing differentiation among the individual market segments. After significantly higher financing costs in recent years led to a noticeable market adjustment, the owner-occupied housing market is now showing clear signs of stability. Prices for new-construction condominiums will remain unchanged at a peak of around 6,500 euros per square meter in 2026, while the average purchase price will also remain at the previous year’s level of approximately 5,300 euros per square meter. This suggests that buyers and sellers have adjusted to a new price level.

In the multi-family housing segment, however, the slight adjustment in price-to-income multiples continues. For new construction, the top multiple drops from 23x to 22x, and the average from 20.5x to 20x. Multiples are also declining slightly in the existing housing stock. This trend illustrates that investors continue to value residential real estate cautiously and are still factoring higher financing costs into their expected purchase prices. At the same time, it is evident that high-quality residential properties in prime locations continue to enjoy stable demand.

Completions and building permits remain in sharp decline

The supply side thus remains the defining issue in the housing market. Following a decline in previous years, only about 1,830 apartments were completed in the city and region of Hanover in 2025. At the same time, the number of building permits fell to just about 1,860 residential units. Both figures mark the lowest levels in the past ten years and are significantly below the region’s long-term housing demand.

The decline in permits has a delayed effect on construction activity and suggests that the supply of new housing will remain limited in the coming years as well. While various policy measures—including accelerated planning and permitting procedures, new tax incentives, and simplified building standards—are intended to revive housing construction, no sustainable turnaround has been evident so far. The supply shortage is therefore likely to continue to shape the market in the medium term as well.

Rental Market Remains Under Pressure

While purchase prices are stabilizing, the upward trend in residential rents continues. The prime rent for new-construction apartments will rise to around 18.70 euros/sqm in 2026, up from 18.00 euros/sqm the previous year. The average rent for new-construction apartments will also increase from 14.20 to 14.70 euros/sqm. In the renewal segment, the prime rent will also rise to around 14.70 euros per square meter, while the average renewal rent will increase to about 11.10 euros per square meter.

This rental trend underscores the persistent excess demand in the housing market. The continued scarcity of new construction supply is met with high demand for modern living space, leading to new record highs, particularly in the high-end new-construction segment. At the same time, renewal rents are also continuing to rise, causing price pressure to increasingly spread across the entire housing market. As a result, rents continue to grow at a significantly faster pace than purchase prices.

Outlook: Supply Shortage Remains the Defining Factor

The residential real estate market in the Hanover region will continue to be significantly shaped by the limited supply of new construction in the coming years. The low number of building permits issued in recent years will have a delayed impact on completions, meaning that no noticeable easing of supply constraints is expected in the short term. At the same time, the slight uptick in building permits in the first half of 2026 suggests that government incentive programs and simplified regulatory conditions may be beginning to take effect. However, given persistently high construction costs and stringent financing conditions, it remains to be seen whether this will lead to a sustainable trend reversal.

While purchase prices have largely stabilized following the market adjustments of recent years, the shortage of supply is likely to continue putting pressure on the rental market. The future development of the residential real estate market will therefore depend crucially on whether it proves possible to permanently increase new construction activity again and gradually adjust the housing supply to meet the persistently high demand