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Despite the ongoing strong interest in German residential real estate Savills suggests the market for residential portfolios is likely to have reached its cyclical high in 2013 with the transaction volume expected to slow down this year.
Although figures for residential portfolio transactions in Germany were skewed heavily in the last quarter of 2013 due to the takeover of GSW Immobilien by Deutsche Wohnen AG, the year proved to be a remarkable one for the German residential investment market, and one we are unlikely to see repeated in a hurry. Overall residential portfolio turnover for the year reached €13.8bn, up 35% on the previous year’s €10.23bn – itself a boom year in the sector.
Figures published by property advisor Savills show that the number of transacted portfolios rose by 17% to 193, against 165 in 2012, and the number of units transacted increased by 14% to over 221,000, compared with approximately 193,000 in 2012, based on Savills’ own data.
Karsten Nemecek, managing director corporate finance – valuation at Savills Germany, commentsed, '2013 was a remarkable year for residential investment. No other property type in Germany attracted higher amounts of money from institutional investors than residential portfolios.'
The firm’s research reveals that public real estate companies and REITs were by far the largest group of buyers in 2013, accounting for a share of 54% of investment (approximately €6.9bn). Insurance firms and pension funds are next on the list, accounting for a share of almost 9% (€1.2 bn). Domestic buyers dominated, accounting for 75% of the transaction volume, followed by investors from Luxembourg (approximately 6%) and Austria (5%).
Of the sellers, German investors also dominated accounting for 61% of sales, followed by US (13%) and Swiss vendors (11%), according to Savills. These figures do not include the GSW acquisition for which its shareholders were paid by means of Deutsche Wohnen shares and consequently did not sell residential properties. In terms of investor types, banks were the most active sellers accounting for 32% of sales, followed by private equity funds (17%) and public real estate companies and REITs (11%).
Despite the ongoing strong interest in German residential real estate Savills suggests the market for residential portfolios is likely to have reached its cyclical high in 2013 with the transaction volume expected to slow down this year. This is partly due to a lack of suitable properties for sale, but also due to fears of the possible effects of the new Mietpreisbremse (“rental brake”) and other legal impositions being championed by the government coalition.
Matthias Pink, responsible for research at Savills Germany, is still optimistic:
“There is much to suggest that even in 2014 an above-average transaction volume will be achieved. With a decreasing supply of available stock for sale a lot will happen on the capital market in the form of IPOs, which are not reflected in the statistics, as well as mergers and acquisitions of companies.”