German Market Q3 2015 - Residential Portfolios: Transaction volume outperforms Q3 2014 by 81%

Throughout the first three quarters of 2015 residential portfolios in Germany worth almost € 18.4 bn changed ownership. This marks an increase in the transaction volume of 81% year-on-year. The transaction volume of the past twelve months totaled approx. € 21.8 bn (- 4.1% compared to the 12-months-volume in Q2 2015). The number of transacted units rose by 41% year-on-year in Q1 – Q3 to over 263,000 while the number of transactions increased only slightly to 212 (Q3-14: 194).

However, the number of portfolios comprising a minimum of 1,000 units dropped significantly year-on-year from 26 to 16. “In 2015 the activity on the German residential portfolio market is particularly characterised by mergers of large listed residential property companies whereas the number of major asset deals dropped significantly”, outlines Karsten Nemecek, Managing Director Corporate Finance – Valuation at Savills Germany.

By way of example, the takeover of Gagfah by Vonovia (previously Deutsche Annington) and the acquisition of Westgrund by Adler Real Estate alone added up to a combined transaction volume of just below € 9 bn, representing 49% of the total transaction volume. In overall terms listed residential property companies accounted for over 69% of the total transaction volume. Given the strong activity of the German listed residential property companies almost 88% of the total volume transacted throughout the first nine months of the year were attributable to German investors (Q3-14: 75%).

The continuously huge demand for residential property in Germany is not only reflected in another increase in the transaction volume but also in the development of prices. In the first three quarters of 2015 the average price per unit stood at approx. € 69,700 and therefore was 29% higher than in the same period of last year (approx. € 54,300). “Although the willingness to pay higher prices continued to grow the number of large-scale portfolios comprising a minimum of 1,000 units in the market dropped significantly as in the meantime the major part of such stock is owned by investors who normally seek a long-term holding period and often intend to grow. Offside the large corporate takeovers the asset deal sector therefore presents significantly smaller lot sizes”, states Matthias Pink, Director and Head of Research at Savills Germany. Further mergers are on the agenda prior to end of the year with the intended takeover of LEG by Deutsche Wohnen being particularly noteworthy. “As large-volume residential packages are becoming increasingly rare we expect the trend of smaller lot sizes in asset deals to continue even though in the course of portfolio adjustments of the large listed residential property companies several smaller residential packages might be brought onto the market”, concludes Karsten Nemecek.

In light of the unabated strong demand und the upcoming takeovers the total transaction volume is expected to reach a figure slightly below € 30 bn in 2015 – a record turnover at an unimagined level.

View the Residential Portfolio Markets Q1 - Q3 2015 Table here.