ING has said demographic change is set to reshape the German residential market, creating a more fragmented landscape where housing shortages and vacancies increasingly exist side-by-side rather than triggering a nationwide property downturn.
In new analysis published on 29 April, economists Carsten Brzeski and Franziska Biehl said Germany's ageing population, falling birth rates and shrinking workforce will have a significant impact on housing demand patterns through to 2040.
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According to the report, Germany's population is expected to decline by around 2.5 million people by 2040, while the working-age population could fall by more than 5 million, or 10%. However, ING said fewer people does not automatically mean weaker housing demand.
The bank pointed to shrinking household sizes as a key counterbalance. Over the past 25 years, one and two-person households have risen by around 20%, while larger households have become less common. As a result, total household numbers increased from around 37 million in 2000 to more than 41 million in 2025.
ING expects that trend to continue, with one and two-person households forecast to grow by a further 1.2 million over the next 15 years, while larger households decline by around 750,000. Overall household numbers are therefore likely to remain broadly stable.
Instead of a demand collapse, the report argues Germany faces a mismatch problem. Housing supply may exist, but increasingly not in the right size, quality or location to meet demand.
"Germany is therefore not heading towards a broad housing surplus, but a more fragmented housing market in which shortages and vacancies exist side-by-side," the economists said.
Regional divides are already emerging. Around 17% of city households are considered overcrowded, compared with just 5% in rural areas. At the same time, under-occupation is more common outside cities, where many older homeowners remain in properties larger than they need.
The report highlighted differences across federal states. Regions such as Mecklenburg-Western Pomerania and Saxony-Anhalt have ageing populations and vacancy rates between 5% and 9%, while younger city states such as Hamburg and Berlin have vacancy rates below 2%.
Looking ahead, ING outlined two possible paths. In one, worsening affordability in cities pushes more households to rural areas, easing urban pressure and absorbing some vacant stock. In the more likely scenario, younger households remain concentrated in cities, leaving structurally weaker regions with rising vacancies and softer prices.
By 2040, the bank said Germany may no longer have one unified housing market, but many localised markets with contrasting dynamics.
For the interiors and housing sectors, the findings underline how future demand may increasingly depend on regional migration trends, smaller households and the adaptation of existing housing stock.
More information:
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