Fragmented housing
Housing
A new study on Germany’s residential housing market shows how fragmented the market is and how the lack of scale efficiencies have led to inflated cost structures, despite robust growth among listed residential property firms.
The study, produced by two partner consultancies Akselrod Consulting and Barkow Consulting, is the latest in a series of useful research prepared by Jesse Freitag-Akselrod and Peter Barkow on Germany's listed real estate companies and the role of the capital markets as a source of finance for the sector. For this study the researchers analysed ownership data from more than 300 German residential landlords.
The study shows that the biggest ten listed German residential property firms added over 300,000 units to their portfolios in 2013 to bring their totals up to more than 1.1m units, up from 900,000 units in 2011.
Nonetheless, says the study, even if the Top 10 German housing investors now own marginally more units than the next largest 40 companies, their combined portfolios still only represent about 5% of the total market for rental accomodation.
Over the last 24 months, the Top 10 has seen three new entrants: Berlin-based Deutsche Wohnen, with the largest absolute increase in housing units at 96,000 and now merged with fellow Berlin company GSW Immobilien AG, Hamburg's TAG with the largest rise in the Top 10 over a two-year period, and Vivawest, the group established by the merger of Evonik Wohnen and THS. Vivawest has an unusual ownership structure, encompassing a foundation, a pension fund, a union and the publicly-listed energy conglomerate Evonik.
The researchers highlight how half of the Top 10 residential owners are stock-exchange listed, with three largest being Deutsche Annington, Deutsche Wohnen and GAGFAH. Two other listed players, LEG and TAG, are respectively the sixth and seventh largest. Public housing companies SAGA GWG, Degewo, Nassauische Heimstätte, and GEWOBAGm account for the remaining four.
"The above results highlight a high degree of fragmentation in the German residential market and suggest the lack of scale efficiencies and inflated cost structures in large parts of the residential universe," the consultants say.
The 16 publicly listed companies included in their research own a combined 770,000 German housing units, or about 26% of the sample. Of this, 80,000 units are owned by four foreign listed companies. In 2013 the listed sector grew by around 310,000 units, largely driven by the IPOs of Annington and LEG, but also benefiting from ongoing company acquisitions and consolidation.
"The listed space is thus the most dynamic player in terms of residential market share gains," the report said, but added: "Such gains come largely at the expense of privately-held companies."
