German residential investment market could see second highest transaction volume on record, says Savills
According to Savills, the German residential property market has been almost unaffected by the Covid-19 pandemic this year. Transactions involving properties with at least 50 apartments changed hands for approximately EUR15.8 billion in the first three quarters of 2020. This represents an increase of 29 per cent year on year as well as a 29 per cent increase on the five-year average.
Subject to further significant restrictions due to Covid-19, it is likely that this year’s transaction volume will exceed last year’s (EUR17.2 billion). This would amount to the second highest investment volume of all time.
Karsten Nemecek, Managing Director, Corporate Finance – Valuation, Savills Germany, says: “The fact that the German apartment market has come through the pandemic almost unscathed so far underlines the status of residential property as a safe haven, particularly in Germany.
“Since demand for low-risk but stable investment opportunities is higher than ever, there is likely to be even more capital seeking product in the market going forward.”
Savills notes that the number of units transacted totalled almost 125,000 during the year to date, which is 39 per cent higher than in the corresponding period last year. However, this is largely due to the strong first quarter and particularly the acquisition of Adler Real Estate by Ado Properties.
With a transaction volume of more than EUR2.6 billion, Berlin was once again by far the strongest market for investment, not least owing to the purchase of around 3,900 apartments by Swedish investor Heimstaden Bostad. However, the transaction volume in the German capital has fallen by 42 per cent year on year.
“The rental cap in the Berlin market continues to cause uncertainty. Some investors are, therefore, steering clear of the city for the time being,” says Nemecek. “However, the lower competition among bidders gives opportunistic investors the chance to increase their market share.”
The federal states of Lower Saxony, North Rhine-Westphalia and Saxony have witnessed a high level of investment activity so far this year. The generally transparent number of portfolio sales has been concentrated almost exclusively in these three federal states, where even some portfolios with a four-figure number of units have changed hands.
“The lockdown experience and the increase in working from home could lend additional momentum to suburbanisation, the shift from central urban areas into suburbs, observed even before the pandemic,” says Matti Schenk, Associate Research, Savills Germany, adding: “Well-connected locations with corresponding infrastructure are likely to receive more attention.”