Small apartments are booming, co-living is becoming a trend, and family apartments remain in demand—but what’s really worth it for investors? Discover which type of housing currently offers the best return potential and what matters most when making your choice.
The real estate market is on the move. Investors looking for the best strategy are often faced with a fundamental question: Is it worth investing in small apartments, or are large family homes the better choice? There’s no simple answer, but demographic and economic trends offer clear indications of where the opportunities are currently greatest. Read our blog post to find out 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. By 2023, 20.3% of people in Germany were already living alone—a figure that significantly exceeds the EU average of 16.1%. This trend is gaining momentum, especially in major cities where housing is already in short supply. Whether it’s young professionals seeking flexibility, students moving into their first apartment, or seniors downsizing—more and more people are consciously choosing compact living arrangements. Whether for financial reasons, a minimalist lifestyle, or simply out of practical necessity. At the same time, the average household size is steadily shrinking. In 1991, it was still 2.3 people; 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 worth it
Compact living arrangements are therefore not only in demand but are increasingly shaping the real estate market. Those who invest in this market are betting on a living arrangement with a future. Another plus: getting started is more affordable. Thanks to lower purchase prices, even investors with smaller budgets can benefit from the real estate market. Added to this is a trend that has long since become more than just a fad: micro living. Innovative living concepts are emerging in major cities, where the essentials are concentrated in a compact space—cleverly laid out, functionally designed, and often complemented by shared common areas. While “tiny apartments” have long been part of urban culture in the U.S., Germany is still in the early stages. Demand is growing, and the market potential is enormous. For investors, this is an opportunity to jump on the bandwagon early.
Living alone, living together: Co-living as an investment opportunity
The boom in single-person households, in particular, is fueling a seemingly contradictory development: the trend toward larger apartments with communal structures. Co-living is the name of the concept that combines urban flexibility with social interaction while also making economic sense. Especially in major cities, where housing is scarce and expensive, the demand for intelligently utilized space is growing. Shared kitchens, lounges, and coworking spaces enable efficient living and working in fewer square meters while also enhancing the sense of well-being. While co-living has long been established in the U.S., Germany is only gradually opening up to this concept. The market potential is enormous: high rental income per square meter, low vacancy risks, and a target group with strong purchasing power make co-living a future-proof investment. One drawback: drafting the lease agreements can be complex.
Family Apartments: Potential with a Long-Term Outlook
But while co-living is redefining housing, another market remains just as relevant: family apartments—solid, long-term, and indispensable. In dynamic major cities like Berlin, Hamburg, or Leipzig, spacious apartments with three or more rooms are in short supply. Here, families are desperately searching for affordable housing, and those who provide it benefit from long-term leases and stable income. But the model isn’t lucrative everywhere. In less densely populated regions, rents rise more slowly, while purchase prices remain high. This can reduce returns. Furthermore, families tend to be more settled than singles or students. For landlords, this means, on the one hand, reliable rental income without constant turnover; on the other hand, however, it also carries the risk of prolonged vacancies, as large apartments are in lower demand. Family apartments are therefore not a sure thing, but rather an investment that requires foresight.
The Right Strategy Makes All the Difference
The choice between small and large apartments—whether for families or co-living arrangements—depends heavily on location and individual investment goals. Those looking to capitalize on high demand and flexible tenants should focus on smaller apartments in major cities. Co-living can be particularly attractive here, but it also brings greater complexity due to shorter lease terms and higher administrative costs. On the other hand, those who prioritize long-term leases and want to capitalize on the potential of certain growth regions will do well with family apartments. One thing is certain: The market remains exciting, and those who position themselves wisely can succeed with both strategies.
