• Transaction volume at around €4.5 billion in the first half of 2016

• Ongoing trend toward portfolio streamlining and enlargement

• Dynamic market activity in the medium segment – absence of large-scale transactions

• Property developments and small-scale housing determine another increase in sales prices

According to current analysis prepared by commercial real estate services company CBRE, take-up throughout Germany in the investment market for residential portfolios and complexes upward of 50 residential units stood at around €4.5 billion in the first six months of 2016. Excluding the merger of GAGFAH with Deutsche Annington to form the new Vonovia and the takeover of Westgrund by Adler Real Estate, as well as the purchase of the SüDeWo Group by Deutsche Annington, all of which took place in the first and second quarter of 2015, the transaction volume in the first half of 2016 has contracted by around a quarter compared with the prior year result.

Dynamic market activity, particularly in the lower and medium-size segments
Over the course of the year to date, a somewhat more homogeneous distribution across segments of all sizes has become apparent, which contrasts with a housing investment market that was always dominated by deals in the triple-digit million range in past years. Above all, the lack of suitable properties in the core markets, accompanied by strong and steady demand for high-volume residential portfolios, placed a constraint on the investment volume. 

Especially brisk trading in housing portfolios in the medium-size segment of between €20 and 50 million per transaction continued, however, both in terms of the volume transacted and the number of sales. At some €1.8 billion, the medium-size segment accounted for 40 percent of the entire investment volume. “The increased investment volume as well as the larger numbers of transactions in the small and medium-size segment result from the ongoing trend of large asset holders toward streamlining and enlarging their portfolios and emphasise the dynamic market activity in the German residential investment market”, Luettger explains. It therefore comes as no surprise that, in the first half of the current year, a similarly high number of portfolio transactions were registered compared with the year-earlier period during which 47,000 residential units changed hands, without, however, comparable large-scale transactions and takeovers.

Greater proportion of property development and small-scale housing determines another increase in sales prices
The average sales prices commanded both per residential unit and per square metre of living space increased by approximately 50 percent respectively, and amounted to €96,000 per unit and €1,540 per sq m. Given the persistent shortage of available stock, this development is particularly attributable to the growing interest in new housing developments.

“In the search for attractive yields in Germany, student halls of residence and micro-apartments, alongside property developments, are increasingly attracting domestic and international investors due to high excess demand accompanied by low vacancy rates in the cities, a case in point being the acquisition of the Headquarter-Portfolio by British Global Students Accommodation (GSA)”, Schlatterer adds. The rising number of students and the low availability of living space in university cities reinforce this trend. “The low vacancy rates combined with insufficient completion figures in multi-storey residential building continued to push up rents, particularly in metropolitan regions. In the low and medium price segment, we anticipate that rents are set to rise driven by strong excess demand”, Luettger states.

Transaction volume above the long-term average for 2016 generally realistic
“In view of the unabatedly strong demand for German housing property by institutional real estate investors, we expect a strong second half year with a continuation of buoyant market activity. Given the stable economic situation in this country, international investors who view Germany as a safe investment haven in times of growing uncertainty are increasingly entering the German housing property market”, Linsin says. Further drivers of the transaction volume consist of the ongoing activities of large asset holders in streamlining their portfolios, the search for alternative investments in niche products such as student halls of residence or micro-apartments, as well as the growing attraction of large cities in eastern Germany as investment targets due to the stabilization of the residential market in these regions. “We anticipate a transaction volume in a double-digit billion range that will approximate the 10-year average”, Luettger predicts.

Housing portfolio transactions in Germany (100 residential units or more), H1 2015 vs H1 2016 excluding the GAGFAH, Westgrund AG and SüDeWo takeovers

Source: CBRE Research, Q2 2016.

Market for residential portfolios in Germany

Source: CBRE Research, Q2 2016.

Contacts:
Konstantin Luettger
CBRE GmbH
Head of Residential Investment Germany
+49 (0)69 17 00 77 29
konstantin.luettger@cbre.com

Michael Schlatterer
CBRE GmbH
Team Leader Residential Valuation
+49 (0)30 726 154 156
michael.schlatterer@cbre.com

Dr. Jan Linsin
CBRE GmbH
+49 (0)69 17 00 77 663
jan.linsin@cbre.com