Residential Property Investments Reach €6.8 Billion In Germany
News Posted On: 22 July 2014
Residential property investments are booming in Germany, with €6.8 Billion worth of transactions already made in the first half of FY 2014. Q1 of 2014 recorded investments of €4.9 Billion, €1.13 Billion more than the first quarter of last year. This was primarily due to the effect of three transactions, which include Vitus Group's sale of 30,000 units to Deutsche Annington for €1.4 Billion, the purchase of 11,500 units of the Dewag Portfolio worth €1 billion, and Buwog's (Immofinanz Group) purchase of the DGAG Portfolio worth €900 Million. These three investments amount to nearly half of the total investments made in the sector in the first half of 2014.
Prime markets lose sheen, show reduced investor activity
Investors are now targeting regional cities in Germany for residential investments over primary cities. The country’s top six metropolitan cities are Berlin, Hamburg, Cologne, Düsseldorf, Frankfurt and Munich, all of which seem to have become less attractive to residential property investors. 22 percent of the investments were made in Berlin, Dusseldorf and Munich. The largest volume of investments were recorded in Kiel (approx. 15,100 transacted units), Bremen (approx. 10,200 units) and Monchengladbach (approx. 6,100 units).
These figures imply that investors are now targeting regional cities which are lucrative alternatives to the major cities of the country. The trend can be attributed to rising levels of competition among investors. Markets in the larger cities of Germany have already stagnated and rising prices in these big cities are forcing investors to look for cheaper options that offer greater ROI. The government has also taken up an initiative to cap rental increases, which is likely to be implemented in prime cities as well.
Private equity firms boost transaction sales volume
As the prices increase, lack of investment opportunities in the main markets and changes in government policies are leading investors to smaller markets, private equity firms stand to benefit. Since moving into secondary markets means reduced risk aversion to gain more ROI, the firms are trying to become the most active set of sellers. Together, they accounted for €1.7 billion of the total transactions made, while REITs and listed property businesses were the largest purchasers – approx. €3.8 billion worth of transactions were made by them.
This can only mean two things, first that domestic buyers are looking to own much of the residential properties in Germany, and second that an increasing amount of stock in residential property investments is registered and can be traded on the stock exchange. Savills Germany believes the trend will continue throughout the year. Investment figures in terms of nationality were as follows, Germans stood as the largest investors, accounting for 75 percent and 33 percent of buying and selling respectively. Austrian buyers were 16 percent and UK and Swedish buyers both, were at two percent. The second most active sellers after the Germans were Americans, who were at 32 percent.
Written by Les Calvert
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