Property prices in Frankfurt and Berlin have increased by 15% and 17% respectively since October 2010, according to the Wall Street Journal.

This increase has been attributed to construction slowing down amid soaring housing demand, as the German property market finally starts to lead the way in Europe.

Despite a shrinking population, demand for single and small family homes is actually growing due to the local middle class becoming more affluent, according to the newspaper.

On top of this, building permits for single family dwellings have fallen by -36% in the last five years, with supply in the two major cities at a historic low.

According to the WSJ, rents in Berlin have risen by 8% over the past two years but rental yields across the country can generally be modest as the national rent control system ties landlords down to a particular price for fixed two-year periods.

It concluded ‘p ockets of value may exist in university towns like Karlsruhe and Mannheim, where housing demand is high and yields of more than 7% are still achievable.’