The German investment market for residential portfolios experienced a year-end flurry in 2013 resulting in a transaction volume of €5.1 bn in the fourth quarter, compared with €2.9 bn in Q4 2012, according to data released by Savills.
The German investment market for residential portfolios experienced a year-end flurry in 2013 resulting in a transaction volume of €5.1 bn in the fourth quarter, compared with €2.9 bn in Q4 2012, according to data released by Savills.
The international real estate advisor noted that this was primarily due to the takeover of GSW by Deutsche Wohnen worth approximately €3.3 bn. The research shows that total annual turnover for residential portfolios reached approximately €13.8 bn in Germany in 2013, representing a 35% year-on-year increase on the already remarkable 2012 total of €10.23 bn.
In addition, Savills research shows that the number of transacted portfolios rose by 17% to 193, against 165 in 2012, and the number of units transacted increased by 14% to over 221,000, compared with approximately 193,000 in 2012, according to Savills data.
Karsten Nemecek, managing director corporate finance – valuation at Savills Germany, commentsed, '2013 was a remarkable year for residential investment. No other property type in Germany attracted higher amounts of money from institutional investors than residential portfolios.'
The firm’s research reveals that public real estate companies and REITs were by far the largest group of buyers in 2013, accounting for a share of 54% of investment (approximately €6.9bn). Insurance firms and pension funds follow, accounting for a share of almost 9% (€1.2 bn). In terms of investor origin domestic buyers dominate accounting for almost 75% of the transaction volume, followed by investors from Luxembourg (approximately 6%) and Austria (5%).
On the sell-side German investors dominated accounting for 61% of sales, followed by US (13%) and Swiss vendors (11%), according to Savills. These figures do not include the GSW acquisition for which its shareholders were paid by means of Deutsche Wohnen shares and consequently did not sell residential properties. In terms of investor types, banks were the most active sellers accounting for 32% of sales, followed by private equity funds (17%) and public real estate companies and REITs (11%).
The real estate advisor observes that buyer/seller profiles differ fundamentally from those that characterised the last boom in the residential investment market (2004-2007). On that occasion foreign opportunistic investors with high leverage were among the most important buyers and public sector vendors, domestic industrial companies and housing associations dominated the sell-side. In recent years opportunistic parties have largely acted as vendors although their interest in German residential property is once again strong and growing.
Despite the ongoing strong interest in German residential real estate Savills suggests the market for residential portfolios is likely to have reached its cyclical high in 2013 with the transaction volume expected to slow down this year.
Matthias Pink, responsible for research at Savills Germany, explained: 'Two factors in particular will impact on the transaction volume going forward. Firstly, the number of major transactions will decrease due to a lack of product. Secondly, the foreseeable stricter regulatory framework, with the new coalition aiming to continue capping rent increases for existing contracts but also extending this rental cap to include new lettings, will lead to a certain reluctance on the part of investors.
'Nevertheless, there is much to suggest that even in 2014 an above-average transaction volume will be achieved. With a decreasing supply of available stock for sale a lot will happen on the capital market in the form of IPOs, which are not reflected in the statistics, as well as mergers and acquisitions of companies.'
