The real estate market is in flux. Capital investors seeking the best strategy are often confronted with a fundamental question: Is it worth investing in small apartments, or are large family apartments the better choice? There is no simple answer, but demographic and economic trends offer clear indications of where the opportunities are currently greatest. Read on to discover which investment might be right for you.

Germany on a Solo Course: Small Apartments on the Rise

Germany is increasingly becoming a country of single-person households. In 2023, 20.3% of the population lived alone – a figure that significantly exceeds the EU average of 16.1%. This trend is gaining momentum, especially in large cities where housing is already scarce. Whether it’s young professionals seeking flexibility, students in their first own apartment, or seniors downsizing, more and more people are deliberately opting for compact living spaces—whether for financial reasons, a minimalist lifestyle, or simply out of practical necessity. At the same time, the average household size is continuously shrinking. In 1991, it was 2.3 persons; by 2018, it had dropped to just 2.0 – and by 2040 it could fall to 1.9.

Small, but Mighty: Why Mini Apartments Are Worthwhile

Compact living spaces are not only in demand, but they are also increasingly shaping the real estate market. Investing in this segment means betting on a housing form with a promising future. Another advantage is that the entry costs are more affordable. With lower purchase prices, even capital investors with a smaller budget can benefit from the real estate market. Additionally, there is a trend that has long ceased to be just a passing fad: micro living. In metropolitan areas, innovative housing concepts are emerging where the essentials are realized in compact spaces—cleverly designed, functionally planned, and often complemented by shared communal areas. While “tiny apartments” have long been part of urban culture in the USA, Germany is only just beginning to catch up. Demand is growing, and the market potential is enormous. For investors, this is an opportunity to get on board early.

Living Alone, Together: Co-Living as an Investment Opportunity

The boom in single-person households is fueling a seemingly opposite development: the trend toward larger apartments with communal structures. This concept, known as co-living, combines urban flexibility with social togetherness while also proving economically convincing. In large cities, where housing is scarce and expensive, demand for intelligently used space is rising. Shared kitchens, lounges, or co-working spaces enable efficient living and working on fewer square meters while enhancing the overall feel-good factor. Although co-living is already well established in the USA, Germany is only gradually embracing this concept. The market potential is enormous: high rental income per square meter, low vacancy risks, and a financially strong target group make co-living a future-proof investment. One drawback, however, is that rental contract design can be complex.

Family Apartments: Potential with a Long-Term Perspective

While co-living is redefining urban living, another segment remains equally relevant: family apartments – solid, long-term, and indispensable. In dynamic cities such as Berlin, Hamburg, or Leipzig, spacious apartments with three or more rooms are in short supply. Families are desperately seeking affordable housing, and providers benefit from long-term rental agreements and stable income. However, the model is not lucrative everywhere. In less densely populated regions, rents tend to rise more slowly while purchase prices remain high, which can diminish returns. Moreover, families are generally more settled than singles or students. For landlords, this means reliable rental income without constant turnover, but it also brings the risk of longer vacancies, as larger apartments are in lower demand. Family apartments, therefore, are not a sure thing but an investment that requires foresight.

The Right Strategy Makes the Difference

The choice between small and large apartments – whether for families or communal living arrangements – strongly depends on the location and individual investment goals. Those who want to capitalize on high demand and flexible tenants should focus on smaller apartments in large cities. Co-living can be particularly attractive here, although it also brings more complexity due to shorter rental periods and higher administrative efforts. On the other hand, investors who prefer long-term rental agreements and want to harness the potential of certain growth regions may find family apartments a better fit. One thing is certain: the market remains exciting, and those who position themselves wisely can succeed with both strategies.