German residential portfolios market on target to hit ?10 billion by year end according to Savills

International real estate advisor Savills predicts that the German residential portfolios market is on track to reach a total turnover of ?10 billion in 2012, with ?6.13bn already invested in the first six months of the year. The firm’s data shows that the H1 2012 total is the highest in five years and marks a 75% rise on H1 2011, when the investment volume reached ?3.50bn.

The number of transacted units almost doubled in the first half of 2012 compared to the same period last year, rising from 64,266 to 119,500 units, according to Savills data. This is primarily due to four large-volume transactions comprising over 20,000 units each (LBBW, DKB, Baubecon and Speymill). These deals accounted for almost three quarters of the total number of units transacted and the total transaction volume in this period. Overall Savills notes that the number of portfolio deals decreased in H1 2012 compared with the same period in 2011, from 91 to 60, primarily due to a lack of new supply.

Draženko Grahovac, managing director of Corporate Finance - Valuation at Savills Germany, says: “Over the past two years we have seen packages comprise mostly of a thousand units, but this year large-volume deals are clearly dominating. Market fundamentals for this type of transaction are favourable with a number of large-scale portfolios up for sale, strong investment demand and funding for such deals is also feasible. This has not been the case for a long time.”
According to Savills data German buyers dominated the residential portfolios investment market in H1 2012, accounting for circa 80% of investment activity, similar to Q1 2012 and H1 2011.

Listed property companies and REITs were by far the most active buyers with a 43% share of the transaction volume during the first six months of the year. Insurance companies and pension funds as well as private equity funds followed with a share of 26% and 18%, respectively.

Continuing a trend of the past 18 months Berlin dominated investment activity with over 26,000 residential units sold in the city and its surrounding region in the first half of 2012, corresponding to a share of over 22% of the total number of units transacted. Stuttgart and Hamburg follow with a share of 6.2% and 3.5% respectively.

Matthias Pink, head of research at Savills Germany, says: “We are seeing a growing investor interest in the residential property market in Germany with domestic buyers continuing to dominate the sector. We have seen a very strong half year in this sector and while we expect activity to continue into the second half of the year, we do not expect it match the same levels.”

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