savills-market-in-minutes-residential investment market Q2 2018

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Market in Minutes - Germany residential investment market Q2 2018

Trade conflicts could prolong the residential market cycle

  • Properties in the German residential investment market changed hands for around €8.8bn in the first half of the year (Graph 1), an increase of 19% compared with the corresponding period last year. Almost 45% of the volume was attributable to two company acquisitions (Table 2).
  • The average size of residential portfolios transacted fell by 15% over the last 12 months (Graph 2), which is likely a consequence of the low supply of large portfolios of existing property. For investors seeking to build larger portfolios, therefore, there is scarcely any alternative to acquiring several smaller portfolios. Against this background, development acquisitions are becoming increasingly important, accounting for 26% of the transaction volume.
  • Transaction activity in the surrounding regions of the A-cities has risen appreciably. These accounted for 5.8% of the investment volume in the first half of the year (five-year average: 3.2%). The surrounding regions are increasingly benefiting from the strained housing markets in the core cities and, in some cases, are growing more quickly than the A-cities themselves (see also “German residential market report”). This is paving the way for further rental growth.
  • In view of the intensifying global trade conflicts, the prospects of rental income which is relatively independent of economic conditions could attract further inflows of capital to the German residential market, meaning that there is no end to the cycle in sight for the time being.