savills-market-in-minutes-residential investment market Q1 2018

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Market in Minutes - Germany residential investment market Q1 2018

Purchasers of developments are increasingly exploring locations outside of the A-cities

  • The German residential investment market enjoyed the most dynamic start to a year since the record year of 2015. The transaction volume in the first quarter of 2018 totalled around €4bn (see Graph 1), representing an increase of 9% compared with the opening quarter of last year.
  • The top seven cities accounted for 36% of the transaction volume (Table 1), which is materially ahead of the five-year average of 48%. The fundamentals favour investments outside of the A-cities. The number of households, and hence demand for housing, is expected to rise in around half of all districts (in German: Kreis) and urban districts (in German: Landkreis) by 2030.
  • In the B, C, and D-cities, rents for first-time occupation have risen more sharply than in the A-cities over the last five years. This could explain why locations outside of the A-cities were also responsible for a higher proportion of investment volume with regard to development deals. These locations accounted for 46% of investment volume in the first quarter of 2018 compared with a five-year average of only around 33%.
  • Average prices per apartment fell marginally in March (Graph 4), which was primarily attributable to the Buwog acquisition. The 11% decline in the number of transactions since 2017 (Graph 2) suggests that the supply has become even scarcer. Consequently, prices are likely to remain at a high level going forward. We expect a transaction volume for the full year of up to EUR 15bn.