German residential portfolios totalling just under €7.8 billion changed ownership in the first three quarters of 2012 according to Savills, marking a rise of 51% on the same period in 2011 when the firm recorded residential portfolio investment volumes at €5.15 billion.  In addition, the international real estate advisor forecasts that this sector is still on track to reach a €10 billion turnover by year end, as predicted by Savills at the end of H1 12.

Karsten Nemecek, Managing Director of Corporate Finance – Valuation at Savills Germany, says: “The German residential portfolio market is attracting significantly increased investment interest, particularly against government bonds of countries with strong credit ratings. In view of the extremely low interest rate levels over the medium term and rising inflation we expect this to remain unchanged in the forthcoming years.

“Contrary to the three preceding years, the dynamics are not confined to the core residential sector.  We are seeing increasing demand across the whole risk spectrum and expect the market parameters to remain favourable.  With a number of large packages in the market which are unlikely to be concluded until next year, we forecast continued above-average transaction volumes in 2013.”

Savills records a marked diversification in the market, with 54% of transacted units in the first nine months of 2012 located outside Germany’s main cities of Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart, up from 23% year-on-year.  Nonetheless, Savills notes that risk-averse investors still favour the key markets with over 35,000 units of a total 147,575 transacted units in Q1 to Q3 2012 located in Berlin.

Matthias Pink, head of research at Savills Germany, comments: “A lack of product and high price levels in the key German cities combined with increasing investment activity in value-add and opportunistic stock made transaction volumes in the regional markets rise disproportionately. However, the top cities continue to be focus areas for investors and Berlin remains the undisputed leader in terms of the number of transacted units.”

According to Savills, public real estate companies represented the biggest share of investment into German residential portfolios in the first nine months of the year, having invested over €1.5 billion net purchases in 2012 to date. Insurance companies and pension funds follow, accounting for a total of over €1 billion of net investment. This figure, however, only reflects the direct investments made by this investor group, with an additional circa €0.5 billion invested through special-purpose funds. Private equity funds also proved very active according to Savills data, recording net investments of just below €0.5 billion in this period.  The real estate advisor expects transaction volumes in the German residential portfolio sector to remain high in the final quarter of 2012 as these investor groups continue to seek opportunities.

Residential portfolio market Q1-Q3 2012