German residential portfolio transaction volumes totalled €6.8 bn in the first half of 2014, an 18% increase year-on-year from €5.8 bn in the same period last year, according to Savills.

German residential portfolio transaction volumes totalled €6.8 bn in the first half of 2014, an 18% increase year-on-year from €5.8 bn in the same period last year, according to Savills.

The firm reports that the number of transacted units rose by almost 50% during H2 1014 to 132,500. As a result, the average price per unit dropped by 20% during July 2013 to July 2014.

Whilst the half-year statistics were strong, Savills does caution that only €1.4 bn was invested between April and June 2014 compared to €5.1 bn in the three previous months.

Karsten Nemecek, managing director of Corporate Finance and Valuation at Savills: 'We have seen a succession of large residential portfolio sales, some totalling over €1 bn, which started in February 2012 with the sale of the LBBW apartments. We do not believe we will see many more transactions of this scale other than mergers and acquisitions, such as the takeover of GSW and Estavis.'

Savills noted that investment activity has also shifted towards secondary locations in H1 2014. In 2013, the prime markets of Berlin, Munich and Dusseldorf accounted for 22% of activity, whereas in 2014, Berlin was the only remaining prime market on the list of top five most active markets, joined by Kiel, Bremen, Möngchengladbach and Lübeck.

Matthias Pink, head of Research at Savills, commented: 'Given the substantial increase in prices and the lack of product in the prime markets, investors are increasingly looking towards alternative locations.'

PRIVATE EQUITY
The firm states that private equity companies took advantage of investors' reduced risk aversion to become the most active group of sellers, accounting for €1.7 bn of product transacted. Listed property companies and REITs were the most active buyers, together purchasing circa €3.8 bn or over half of the German residential portfolios up for sale. In terms of nationalities, Germans were the most active buyers and sellers, accounting for 75% and 33% respectively. They were followed by American sellers at 32%.
Austrian buyers accounted for 16%, and UK and Swedish buyers both 2%.

Nemecek added: 'We believe the second half of the year will follow similar trends to Q2 with transaction activity primarily taking place in small to medium lot sizes as well as outside the prime markets. As demand exceeds supply, even in secondary and tertiary markets, we expect prices to rise in these locations. In terms of total annual turnover we predict it could be considerably above €10 bn although is unlikely to reach the €14.3 bn seen in 2013.'