European housing offers biggest growth opportunity for investors

Europe’s residential real estate offers the biggest growth opportunity for investors, according to new research from JLL.

JLL’s European Multifamily Investment report showed that investment into the residential real estate sector was up by more than 40% to €56bn in 2018.

Demographic and economic drivers continue to attract investor interest into the living asset classes including multifamily, the largest sector within the living sector.

“This includes a new wave of purpose-built multifamily developments that cater to the changing tastes of renters,” the report stated.

Germany, Europe’s largest multifamily investment market saw its transaction volume for residential properties and portfolios reach €18.6bn in 2018, which was 38% above aggregate volumes in 2017 and 10% above the five-year average of €16.9bn.

The UK and the Netherlands, which represent the second and third investment market, recorded €6.8bn and €5.6bn respectively.

The JLL report revealed that most of the cross-border investment into European multifamily came from other European countries (51.5%).

However, there has been a significant increase in activity from North American investors and global funds over the past year.

”North American investment activity has sky-rocketed by 162% in the last twelve months alone, becoming the second-largest source of capital for multifamily outside of Europe,” the report said.

Philip Wedge-Bernal, EMEA living research associate and author of the report said the European multifamily sector has far exceeded expectations over the last year, with increasing North American interest cementing the continent’s position as a leading hub for global residential investment.

“The pace at which some markets are growing is very exciting, spurred by investor recognition of multifamily as a highly credible defensive asset class that provides diversification as part of a wider real estate portfolio.

“Portfolio and platform activity have driven total investment volumes over the past two years, with average deal sizes growing across most European markets. Portfolios are often comprised of assets in major urban hubs and this report highlights that investor interest will remain focused on Europe’s largest population centres.”

Adam Challis, head of EMEA living research and strategy, said: “Long-term shifts in demography, such as shrinking household sizes and longer, healthier lives are combining with continued urbanisation to create a chronic undersupply of appropriate homes across European cities.

“Combined with big changes in technology, and a deeper focus on wellness and sustainability, JLL expects the most progressive investors to outperform the market by understanding these new customer demands. Incumbents will be joined by disruptors that are using digital solutions to recast the customer experience.”