According to Savills, the first half of 2022 saw over €27.3 bn of capital invested in multifamily assets across Europe - the strongest H1 on record. However, some countries have seen a quieter spell and more highly leveraged investors have withdrawn from the market.
The agent said volumes declined in Germany, Ireland, the Netherlands and Sweden in Q2. However, there was a marked increase in activity in the UK, Denmark and Spain. It said this highlighted the ‘growing diversification’ of investment in multifamily across the continent and is likely, in part, to reflect where investors can find higher yielding opportunities.
It also expects investment volumes within the sector to remain subdued in Q3.
Yields currently stand at 2.1% in Berlin, 3.15% in Copenhagen, 2.8% in Paris, 3.6% in Dublin and 3.25% in London and Madrid.
Marcus Roberts, head of Europe - Savills operational capital markets, explained: ‘It has been a mixed picture for multifamily yields across Europe during H1 2022. In some markets, such as France, Ireland, Germany, and Sweden, yields have remained stable. In Germany this has been due to continued demand from equity-rich investors, which has underpinned yield performance. In the UK, yields have hardened slightly, and as the sector matures, early investments are outperforming their initial underwrites, driving increased appetite from investors.’
‘Despite the current economic headwinds, we are seeing significant developments and deals going ahead in European markets such as Poland and Spain, showing that many investors continue to believe very strongly in the long-term growth of the sector and its returns.’
However, Savills said the more highly leveraged investors had temporarily withdrawn from the market, waiting to see what happens over the next few months with interest rates, inflation and build costs.
While other investors remain active, many are taking longer to scrutinise deals before completing.
But all this will adjust to the new conditions as investment activity picks up again towards the end of the year, given the underlying appetite for the sector remains very strong.
Richard Valentine-Selsey, head of European living research consultancy at Savills, said: ‘While inflation, build cost and debt cost increases are impacting all property sectors, multifamily is in a strong position to weather these headwinds. The supply and demand imbalance in many markets across Europe means that the sector is still seeing rental growth and it is also one of the few sectors that is able to regularly rebase rents in order to capture that growth.’
