According to international real estate advisors Savills, H1 German residential portfolio transaction volumes in the German residential portfolio market totaled €6.8 billion, an 18% increase year-on-year from €5.8 billion in 2013. The firm reports that the number of transacted units rose by almost half during the same period to circa 132,500. As a result, the average price per unit dropped by a fifth during July 2013 and July 2014.

Whilst the half year stats were strong, Savills does caution that only €1.4 billion was invested between April and June 2014 compared to €5.1 billion in the three months previous. 

Karsten Nemecek, Managing Director of Corporate Finance and Valuation at Savills, says: “We have seen a succession of large residential portfolio sales, some totaling over €1 billion, which started in February 2012 with the sale of the LBBW apartments. We do not believe we will see many more transactions of this scale other than mergers and acquisitions, such as the takeover of GSW and Estavis.”

Savills finds that investment activity shifted towards secondary locations. In 2013, the prime markets of Berlin, Munich and Dusseldorf accounted for 22% of activity, where as in 2014, Berlin was the only remaining prime market on the list of top five most active markets, joined by Kiel, Bremen, Möngchengladbach and Lübeck.

Matthias Pink, head of research at Savills, comments: “Given the substantial increase in prices and the lack of product in the prime markets, investors are increasingly looking towards alternative locations.”

The firm states that private equity companies took advantage of this reducing risk aversion of investors to become the most active group of sellers, accounting for €1.7 billion of product transacted. Listed property companies and REITs were the most active buyers, together purchasing circa €3.8 billion or over half of German residential portfolio. In terms of nationalities, Germans were the most active buyers and sellers accounting for 75% and 33% respectively. Austrian buyers accounted for 16%, and UK and Swedish buyers both 2%, while American sellers where the most active after the Germans at 32%.

Karsten Nemecek adds: “We believe the second half of the year will follow similar trends to Q2 with transaction activity primarily taking place in small to medium lot sizes as well as outside the prime markets. As demand exceeds supply even in secondary and tertiary markets we expect prices to rise in these locations, too. In terms of total annual turnover we predict it could be considerably above €10 billion although is unlikely to reach the €14.3 seen in 2013.

German residential portfolio market in H1 2014
 (JPG)