International real estate consultancy firm Cushman & Wakefield (C&W) recorded a transaction volume of EUR 1.04 billion in the German residential real estate market in the first quarter of 2024. This is around 33 percent lower than in the equivalent period of the previous year (Q1 2023: EUR 1.5 billion).
Focus on low volumes and individual property transactions
In Q1 2024, the residential investment market was dominated by smaller deals and individual property transactions. Individual residential transaction volume amounted to EUR 854 million with portfolio transaction volume at EUR 150 million. Compared to a year ago, the individual property transaction volume increased by around 51 percent, there was a decrease of 86 percent for portfolio transactions. The latter were mainly characterised by local and city-centre portfolios, which totalled EUR 134 million.
Largest single property deal in Berlin
The largest transaction involved Bauwens’ Greenpark residential project in Berlin’s Neukölln district. Bauwens sold 758 apartments providing over 30,000 m² of living space via a forward deal. The project is expected to be completed in 2026. In addition, Instone was realised a forward deal with Wohnbau GmbH. The 4Living residential quarter is to be completed in the 3rd quarter of 2024 and comprises 167 apartments with a total area of 12,570 m².In total, around EUR 700 million of German residential investment transaction volume was contributed by domestic investors, almost 70 percent. International investors contributed a good EUR 300 million (30 percent).
Stabilisation of prime yield
In the course of 2023, the prime yield gradually rose to 3.90 percent. In the 1st quarter of 2024, prices have stabilised and there is currently no further increase in the prime yield. C&W expects that price and yield stabilisation will at least continue to solidify over the course of the year, with the prospect of a slight compression in prime yields by the end of the year.
Increasing activity in student residence and micro-living segments
In Q1 2024, C&W noted a transaction volume of EUR 55 million for student residence and micro-living properties. The acquisition of CampusRO, a student urban neighbourhood development comprising 211 student apartments and 40 serviced apartments in Rosenheim, by a German foundation contributed to this. As at the end of 2023, the prime yield for properties in the student housing and micro-living segment is 4.40 percent.
The high demand for student residences and micro-living properties has been inadequately met in the recent past due to low levels of construction activity and a lack of corresponding product. This resulted in the low transaction volume of EUR 120 million last year. After the positive figures of the 1st quarter, C&W expects a market revival in the coming months and increasing sales.
Jan-Bastian Knod, Head of Residential Investment Germany, C&W, comments: “At the start of 2024, the market is clearly optimistic and characterised by price stabilisation. We believe that the residential investment market in Germany is particularly resilient to crises and is becoming increasingly relevant on the investor side. This development is reinforced by the high demand for housing, which currently remains unfulfilled.”
Housing construction target missed of and lowest number of building permits issued since 2012
In 2023 developers fell far short of the goal of building 400,000 new apartments in Germany. At the same time, the number of residential building permits issued fell to 260,100, the lowest level since 2012. The survey showed that both private individuals (-42 percent compared to the previous year) and companies (-20 percent) are planning fewer residential construction projects.
