German investors pay premiums for resi portfolios
German investors are paying a premium for residential portfolios, due to their scarcity, according to an internal study published this month by Engel & Völkers.
Investors paid, on average, a premium of 1.6 times the annual basic rent in the first three quarters of 2017, according to Engel & Völkers’ analysis of 600 transactions totalling €2.2b.
‘The residential property market is now a sellers’ markBarkowet and residential portfolios are very rare,’ Kai Wolfram, managing director of Engel & Völkers Investment Consulting, told REFIRE. ‘Because the investment pressure is so high, institutional investors are prepared to pay premiums for large investment volumes, which was not the case two-to-three years ago,’ he added.
Investors are betting on Germany’s stability and economic growth, Wolfram added. ‘There are so many players in the market today, many of whom are international but investing via a German structure of some kind.’
As a result, fund managers are tapping into demand by launching increasingly large residential funds. In August Hamburg-based fund manager Union Investment raised €620m in its first subscription phase for Germany’s biggest-ever open-ended real estate fund. The fund, UniImmo: Wohnen ZBI, marked the German fund manager’s first residential fund, for which it has joined forces with housing specialist ZBI Zentral Boden Immobilien.
The fund focuses on properties that offer 'affordable living space for the wider population’, with medium to high amenity value, according to Union Investment. Geographically, the fund is open to investment opportunities throughout Germany. Unilmmo: Wohnen ZBI will mainly invest in portfolios with recognisable potential for value growth. Mid-market development projects and existing properties requiring refurbishment will also be considered.
Next year is also shaping up to be a strong one, according to Wolfram. ‘This quarter, we’ve been advising sellers to push back sales until 2018, so a lot could come to market next year.’