The German owner-occupied market continues to stabilise. However, the recovery is becoming increasingly selective, as the renewed tightening of interest rates and inflation is weighing on financing conditions and affecting investment willingness. Transaction volume in the investment market exceeded that of the same quarter last year, with the increased activity increasingly supported by larger deals and a broader deal pipeline. At the same time, financing costs and yield requirements remain key pricing factors.

Fiscal policy remains the most important driver of growth

Following growth in the first half of the year, the German economy is expected to gain further momentum as the year progresses. While higher energy prices are temporarily dampening private consumption, extensive infrastructure and defence spending, along with other government investments, will provide increasing growth momentum as the year progresses. Business surveys also point to improved expectations among companies.

Recovery in the labor market is still a long time coming

The labour market remains robust but is evolving only slowly. Overall, employment remains at a high level, while unemployment is rising slightly. In particular, the demographically driven decline in the labour supply is limiting employment growth, while companies continue to be cautious about hiring new employees due to weak demand.

Inflation rises temporarily again

The sharp rise in energy prices is leading to a higher inflation rate in the short term and eroding household purchasing power. At the same time, the European Central Bank is likely to respond to the renewed upward pressure on prices with another interest rate hike in September. As energy prices normalise over the remainder of the forecast period, inflationary pressures will ease again and the overall economic environment will stabilise.

Companies remain cautious

Although sentiment in the German economy has improved slightly recently, it remains subdued overall. High energy prices, geopolitical uncertainties, and persistently weak private demand are dampening many companies’ willingness to invest and hire. Private investment remains low, and the economic upturn is largely driven by government spending.

Key figures at a glance

As of July 2026. Sources: Julius Baer Research, bulwiengesa, Federal Employment Agency, Federal Statistical Office (Destatis)