Housing Investment Market: Supply shortage continues in the third Quarter of 2016
Investment volume in the first nine months of 2016: €7.2 billion
Large-scale transactions fail to materialize
More than €10 billion anticipated for the full year 2016
The first nine months of 2016 saw approximately €7.2 billion invested in residential portfolios and complexes upward of 50 residential units in the German housing investment market. This take-up has fallen €11.3 billion below the figure posted in the first three quarters of 2015 (down 61%). The current quarterly result of €2.2 billion slightly exceeds the third quarter average for the last five years. This is the conclusion drawn in a current analysis prepared by commercial real estate services company CBRE.
Tight supply in the market for housing portfolios is ongoing. This resulted in prices rising in the housing market in the third quarter as well.
Smaller portfolios and property development on trend
Excluding the three large takeovers of 2015, take-up in the first nine months of 2016 is only half a billion euros down year-on-year.
The merger of GAGFAH and Deutsche Annington to form the new Vonovia, Westgrund’s takeover by Adler Real Estate, and the acquisition of the SüDeWo Group by Deutsche Annington totalled around €10.7 billion in the first three quarters of 2015. There have been no large-scale transactions above €500 million this year so far. “Interest in the housing market nonetheless remains at a high level,” Linsin says. “We are seeing a concentration on smaller lot sizes. Transactions in sizes of €20 to €50 million (+68%) and €50 to €100 million (+56%) have increased compared with the previous year, both in terms of the number of deals registered and the registered volume. “Several new smaller investors are active, and old portfolio holders who have not bought anything in past years have made a comeback, insurance companies for example,” Lüttger explains.
“We are registering a growing interest in property development investments,” Lüttger says. “Investor demand here cannot be fully satisfied either due to restricted property availability.” While 70% of registered investment volume is accounted for by the segment of properties from existing stock, property developments are becoming increasingly important. Almost one third of the investment volume in the first three quarters of 2016 was attributable to new construction projects. Investors have therefore raised the capital invested in project development by 35% to €2.1 billion in a year-on-year comparison.
Urban areas becoming more pricey
There has been a great influx of people into urban centers, which coincides with too few multi-storey residential buildings and still too few completions. This is pushing up purchase prices and causing some investors to seek alternatives in interesting secondary locations which report dynamic, socio-economic development.
“The majority of investment volume is nonetheless accounted for by metropolitan regions,” Linsin comments. Berlin alone reported more than €1.9 billion, followed by Frankfurt and the surrounding municipalities with around €615 million. Discounting the takeovers in 2015, the purchase price for portfolio transactions rose from €1,290 per sq m to €1,570 per sq m in the third quarter of 2016 compared with the year-earlier period. Similar to the prior-year period, just under 200 deals were registered in the third quarter of 2016. However, these transactions comprised only 75,000 residential units in the first nine months of 2016 compared with 95,000 residential units over the same period in 2015.
Outlook: more than €10 billion realistic for the full year 2016
“There are several large-scale projects in the marketing pipeline, with completion expected before the end of 2016,” Lüttger says. “The planned voluntary takeover bid of Conwert by Vonovia is on the cards, among other deals.” “There are also several interesting portfolios in the pipeline, including in the three-digit million range”, Linsin adds. “Depending on realization, we may see a transaction volume of more than €10 billion reached by the end of the full year 2016.”
Housing portfolio transactions in Germany (upward of 100 residential units), excluding the GAGFAH, Westgrund AG and SüDeWo takeovers
Source: CBRE Research, Q3 2016.
Market for residential portfolios in Germany
Source: CBRE Research, Q3 2016.
Head of Residential Investment Germany
+49 (0)69 17 00 77 29
Team Leader Residential Valuation
+49 (0)30 726 154 156
Dr. Jan Linsin
Head of Research Germany
+49 (0)69 17 00 77 663
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.de.