According to international real estate advisor Savills, transactions of residential real estate portfolios in Germany reached €9.7 billion in the first three months of 2015, up 76% year-on-year from €5.5 billion in 2014. The firm predicts that transaction volumes will remain strong as a result of predicted take over and merger activities in the sector.

Karsten Nemecek, managing director of corporate finance and valuation at Savills, comments: "The appetite of institutional investors for German residential property continues to be strong but can no longer be satisfied by direct acquisitions due to a lack of product. We will therefore see a shift towards more merger and acquisition activity in order for residential portfolio activity to take place."

Savills reports that the acquisition of Gagfah by Deutsche Annington accounted for 80% of the transaction volume achieved in Q1 2015. Apart from this sale, another 56 residential portfolios were sold throughout the quarter, four more than a year ago. However, the number of transactions comprising at least 1,000 units reduced from ten to four, a consequence of the low supply in this size category. Demand remains strong in all size groups which is reflected in the pricing.

The firm finds that Dresden was the strongest-performing city with approximately 35,000 units sold. Berlin follows in second place with 24,000 units and Hamburg ranks third with 11,000 units sold. Residential portfolios were sold in fifty cities and municipalities, with smaller markets demonstrating tat many investors are adopting a more risk embracing attitude. 

Private investors and family offices as well as developers were the most enterprising investors in Q1 2015, according to Savills. Those investor types were the most likely to invest in smaller regional markets. However, in terms of volume, listed property companies invested in the greatest amount accounting for almost 90% of transaction volumes. Asset managers accounted for 5% and special funds for 2%.

Matthias Pink, head of research at Savills Germany, adds: “The dominance of the listed property companies as investors will most likely prevail throughout the year. In the current market large corporates are in the position to raise extensive amounts of capital at extremely favourable conditions which allows them to bid more competitively. Therefore, with a limited number of large portfolios in the market we may see more vendors taking the opportunity to sell at inflated prices as it is very much a sellers market.”