According to international real estate advisor Savills, residential portfolios in Germany generated a transaction volume of approximately €2.09 billion in Q3 2014, a slight increase from approximately €1.85 billion in Q2. The turnover from January to September 2014 totalled circa €9.07 billon and represents a 4% increase year-on-year. The firm predicts that total transaction volumes for the year are likely to reach €11 billion.

Savills reports that, despite the increase in transactions volumes, a lack of availability of large (over 1,000 units) residential portfolios has somewhat  constrained volumes. The number of transacted residential portfolios dropped by 8% from 154 to 141, of which 26 comprised 1,000 units or more. In Q3, there have only been five transactions within the category of 1,000 units or more, of which none were over €500 million. By far the two largest transactions were the sale of almost 15,000 residential units by Berlinovo to Westgrund and the purchase of the so-called Franconia package by Deutsche Annington.

Karsten Nemecek, managing director corporate finance & valuation at Savills Germany, comments: “These figures illustrate that the residential portfolio market has passed its cyclical high and activity has gradually slowed down – albeit on a remarkable level compared to the long term average. The weakening transaction activity is a result of lack of supply and the increase in prices. This means that less investment opportunities are available in the German residential market to buyers seeking higher yields, instead we are increasingly seeing investors taking advantage of the current market by putting assets up for sale.”

The firm finds private equity funds have been the most active vendors, selling approximately €1.8 billon to date this year. By comparison private equity acquisitions totalled only circa €120 million. REITs were more active buyers, purchasing almost €5 billion in residential portfolios in Germany as were more traditionally risk averse investors such as housing associations, special funds and family offices. 
Savills states that in the prime cities such as Hamburg and Munich the increasing prices have caused transaction activity to decrease, whilst non-prime cities such as Kiel, Bremen and Dresden are performing well. Berlin is the exception with circa 22,000 units transacted, hence the strongest-performing city. Additionally, the average price per residential unit dropped by a fifth year-on-year to approximately €51,300.

Matthias Pink, director of research at Savills Germany, adds: “Although the price dynamics recently slowed down, cities and municipalities off the prime locations are likely to remain popular with residential investors and increase there share in the overall market.”

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