The German residential market is gaining momentum after three years in the doldrums, with several large sell-offs on the cards. In the first half of 2011, there were 42 residential portfolio deals, according to Cushman & Wakefield, a jump of 19% on the same period last year. In total, 37,000 units were traded with a combined value of around EUR 1.76 bn.

The German residential market is gaining momentum after three years in the doldrums, with several large sell-offs on the cards. In the first half of 2011, there were 42 residential portfolio deals, according to Cushman & Wakefield, a jump of 19% on the same period last year. In total, 37,000 units were traded with a combined value of around EUR 1.76 bn.

‘The market started to recover in the first half of the year although demand is stronger than supply,’ Dr. Malte Maurer, head of residential investment at JLL in Frankfurt, told PropertyEU. ‘There is a big gap between buyer and seller expectations with regard to price. Buyers still expect a discount and a lot of deals have fallen through because buyers weren’t prepared to do this.’

Nevertheless, some big deals have still been pushed through, including TAG Immobilien’s acquisition in February of just over 50% in Colonia Real Estate, which holds a residential portfolio of 18,800 units, for EUR 400mln.

Also, following GSW’s successful IPO in April, many investors looking to exit their residential portfolios will be mulling either an IPO or sell-offs, Matthias Franz, an associate in C&W’s capital markets group in Frankfurt, told PropertyEU.

‘Going forward, I think we will see a mixture of IPOs - like GSW’s recent one - and sell-offs. GSW’s IPO is clearly a positive sign for the market. Other investors are also likely to be considering taking a similar route. German property manager Deutsche Annington, for example, which has invested very heavily in German residential assets, is considering an IPO. However, they have to refinance their assets first,’ Franz added.

A Deutsche Annington spokesman confrimed that ‘an IPO is one of many options’. ‘We currently don't think about selling off the assets, although we do sell up to 2% to tenants,’ he said. The German market remains attractive because it’s ‘incredibly stable’ with no real cycles in the residential market, unlike Spain and the UK, he added.

The second part of this analysis of the German residential sector will be published in PropertyDay on Tuesday.