German residential real estate offers investors a safe haven during the crisis: The transaction volume in the first three quarters of 2020 is significantly higher than the previous year’s level. The prime yield remains stable and CBRE is forecasting a dynamic year-end spurt with a well-filled pipeline in the fourth quarter of 2020.
“The German residential real estate market is still proving its strength in the current crisis and offers many investors a safe haven – especially for new players from other asset classes and countries.” Konstantin Lüttger, Head of Residential Investment at CBRE Germany, is quoted with these words in a CBRE press release from the beginning of October.
Transaction volume at 15.1 billion euros
The strength of the German investment market for residential real estate, of which Lüttger speaks, is enormous: According to the press release, a total of 15.1 transactions was recorded on the market in the first three quarters (Q1 – Q3) of this year for residential properties with a size of 50 or more units Billion euros recorded – this figure exceeds the transaction volume in the same period of the previous year by a full 25 percent.
Apparently, a CBRE analysis revealed that these figures were mainly due to the takeover of Adler Real Estate by ADO Properties and the extraordinarily high demand from investors for low-risk properties due to the crisis.
The transaction volume of international investors is particularly large this year: They are apparently looking for platforms in the residential segment and have made some large transactions with a value of more than 250 million euros each on the German housing market.
The B-cities expect yield compression
According to the CBRE press release, investors in the seven major German cities are enjoying a stable prime yield, which is currently a median of 2.37 percent. The yield range is 2.2 percent in Munich and 2.6 percent in Stuttgart.
But not only the top cities hold up well as a safe investment in the crisis: “Not just since Corona and the new awareness of our own four walls have we seen an increasing demand for living space outside or on the edge of the top 7 cities” said Team Leader Research Jirka Stachen from CBRE in the press release.
Michael Schlatterer, also an expert at CBRE, is quoted as follows on this topic: “The increasingly scarce supply in the top cities makes this one [B-]More and more interesting locations for investors. We therefore expect a significant yield compression there in the coming months. ”In a press release from Postbank, expert Eva Grunwald explains that the smaller centers with (even) lower prices are also attractive to smaller investors and homebuyers, which of course increases demand prices – and returns – are also rising.
CBRE reports that there is already excess demand in some of these B-centers, for example in smaller cities with large universities.
Annual forecast: transaction volume of up to 20 billion euros
According to Lüttger, further, larger transactions are on the horizon for Q4 2020, and given the developments in the residential real estate market in 2020 so far, he is quoted in the CBRE press release with the following forecast: “The residential transaction market is entering the next quarter with a well-filled pipeline. We therefore expect a dynamic final spurt on the residential property market and anticipate a transaction volume of up to 20 billion euros for the year as a whole. “
If this number actually occurs, 2020 would see the second-highest transaction volume since 2012. At 15.1 billion euros, the transaction volume is already higher after the first three quarters than in 2012-2014 and 2016 – possibly because other asset classes such as the hotel and commercial sectors suffer particularly from defaulted and deferred rent payments and both German and international investors Therefore, invest more in the much safer residential real estate: After all, you always live, but you can do without traveling and shopping.
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