After the interest rate correction, the German property market has re-sorted itself: purchase prices have come down, rents have kept rising — initial yields are once again above the financing costs of many assets. Whether an investment carries itself in 2026 is decided less by the market than by the structure: depreciation regime, legal form and exit planning shape the after-tax return more than the purchase price does.
The starting point: yields are back, selection remains
The market once again offers an environment where the numbers can work: more realistic purchase prices, tight rental markets in the metropolitan areas, structural housing shortage driven by weak construction activity. At the same time, energy efficiency and location are splitting the asset class into winners and losers — refurbishment needs are a pricing factor today, not a side issue. For professional buyers this means: select assets by cash flow rather than by appreciation hopes, and settle the tax structure before the notary appointment.
The depreciation regime: rarely has there been this much AfA
- Straight-line: 3 percent for residential buildings completed from 2023 (§ 7 (4) EStG); existing stock 2 or 2.5 percent.
- Declining-balance: For new residential construction with building start or purchase contract between 1 October 2023 and 30 September 2029, § 7 (5a) EStG allows 5 percent of the residual value — with a later switch to straight-line depreciation. Over the first ten years this accumulates roughly a third more depreciation volume than straight-line (around 40 instead of 30 percent of the assessment base).
- Special depreciation for new rental housing (§ 7b EStG): an additional 5 percent per year in the first four years for Efficiency House 40 new builds with QNG certification within the construction cost limits — combinable with declining-balance depreciation.
- Remaining useful life: For existing properties, an expert report can substantiate a shorter actual useful life and increase depreciation considerably.
Declining-balance depreciation and the § 7b special allowance hinge on cut-off dates, efficiency standards and cost ceilings — they cannot be created after the acquisition. The depreciation strategy belongs in the acquisition calculation, not in the first tax return.
The structural question: private, KG or GmbH
Three basic models compete:
- Private assets: capital gains tax-free after ten years (§ 23 EStG) — unbeatable for buy-and-sell strategies, but current income taxed at the full personal rate.
- Asset-managing GmbH & Co. KG: tax-transparent, the ten-year holding period remains available, flexible for family participations.
- Real estate GmbH: With the extended trade tax reduction, the current burden falls to 15.825 percent — and further from 2028 as corporate income tax declines. The price: the substance remains permanently tax-entangled. We have quantified the trade-off in our article on the asset-management GmbH .
For larger transactions, real estate transfer tax architecture comes on top: share deals trigger transfer tax if at least 90 percent of the shares change hands within ten years (§ 1 (2a)/(2b) GrEStG). And anyone selling business property should know the § 6b reserve before the gain is taxed.
Financing and stress test
The days of one-percent financing are not coming back; in 2026 the calculation uses conservative assumptions: debt service capacity even at refinancing rates above today's level, maintenance reserves according to age and condition, ten-year energy capex planning. Professional investors model the after-tax return across the full cycle — acquisition, operation, exit — instead of working with gross initial yields.
Frequently Asked Questions
When is a property worthwhile as an investment?
When the sustainable cash flow is positive after taxes, maintenance and a realistic refinancing rate, and the structure matches the exit strategy. Appreciation is a bonus, not the basis of the calculation.
Which depreciation applies to new builds?
Straight-line 3 percent; for projects with construction start between October 2023 and September 2029 optionally declining-balance at 5 percent of residual value — plus the § 7b special allowance for Efficiency House 40 new builds.
Buy property privately or via a GmbH?
Private ownership scores with the tax-free sale after ten years, the GmbH with low current taxation of retained rental income. The answer depends on holding period, distribution needs and portfolio size.
More than 20 years advising entrepreneurs, investors and family businesses. Reserved tax services are provided by our partner tax firm, TABAK Steuerberatung.
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