10. August 2012 
Print
Print
Residential portfolio transaction focus on Berlin and NRW
The NAI apollo group has completed its latest analysis of the residential real estate market and has published its findings in a new 160-page report. The “Residential Market Report Germany 2011/2012” covers all aspects that are significant to the residential real estate market with regard to the current situation, past developments and future expectations. The latest Residential Market Report Germany 2011/2012 of the NAI apollo group includes a detailed analysis of 11 large residential locations: Berlin, Dortmund, Dresden, Düsseldorf, Essen, Frankfurt am Main, Hamburg, Cologne, Leipzig, Munich, Stuttgart. A major new addition to the 2011/2012 Residential Market Report compared to last year is the dynamic city-attractiveness ranking, StAR, which analyses the current and future potential of the 114 independent cities.
Most residential portfolio transactions take place in the federal states of Berlin and NRW
As in previous years, demand on the residential portfolio market (> 30 residential units) is particularly high for residential stock in the German metropolises and regional urban centres. As in the last two years, Berlin is at the centre of investment activity: the German capital accounted for around 23% of the assignable portfolio transactions with an investment volume of around €2 billion. Next in line are the cities of Hamburg, Munich, Frankfurt, Düsseldorf and Cologne. “In a breakdown by federal state, a majority 48 percent share of the transactions related to the federal states of North Rhine Westphalia and Berlin,” says Dr. Konrad Kanzler, Head of Research at the NAI apollo group.
German investors account for 67.1 percent of the sales volume
German investors represented the largest investor group in the first half of 2012, accounting for 85.7% of the transactions or 67.1% of the volume. However, international investors also continue to play a special role. Before the financial crisis in 2007, foreign investors were still responsible for 38.4 percent of all portfolio transactions, but this share had fallen to 19.8 percent in 2011. In the first half of 2012, the foreign investor share fell further to 14.3 percent. Nevertheless, this still amounts to 32.9 percent of the volume or 29.3 percent of the traded residential units.
When making a distinction between institutional and private investors, institutional investors accounted for 90.7 percent of the individual portfolio transactions (2011: 80.3%). “However, there has not been a decline in interest from private investors. Asset security, the lack of low-risk investment alternatives, increased liquidity and the long-term security of the current low interest rates remain central arguments for a property investment,” says Kanzler. Instead, Kanzler believes that the reduced activity by private investors is due more to increased competition for smaller portfolios, where the private investor frequently emerges as the loser. “Other private investors do not always buy in terms of potential yields, but are looking for individual ‘select properties’,” said Kanzler.
Positive outlook for the current year
“At this time, a positive outlook must be given for the current year. After a sensational €6.9 billion by the middle of the year, we are forecasting around €10 billion by the end of the year,” says Kanzler. He adds: “There is continuing interest in residential investments from both institutional and private investors, all with high levels of liquidity. Positive framework conditions such as favourable interest rates and the stable economic situation will also not change in the medium term.” Further potential mega deals include the property subsidiary of BayernLB (GBW with around 33,000 residential units) and the state-owned TLG Immobilien GmbH (11,500 units). Besides these large sales, trading in small and medium-sized residential packages will also contribute to a further high level of transaction activities in 2012.
Berlin experiences the strongest rise in quoted rental prices, followed by Hamburg and Munich
In the analysis of 11 large residential locations in Germany, the Bavarian capital of Munich was not only the most expensive residential market with a weighted average quoted rent of 13.10 €/sq m in 2011; quoted rental prices also increased here significantly (+5.6%) compared to the previous year. A stronger increase was recorded only in Hamburg (+5.8% to 11.00 €/sq m) and Berlin (+8.4% to 7.75 €/sq m). Stuttgart followed Munich with an increase of +5.3% to 10.00 €/sq m. The increase was a more moderate 2.2% in Frankfurt am Main (11.75 €/sq m), which is the second-most expensive market among the cities analysed in the report. There was no change in Cologne, where the average rent was still 8.85 €/sq m. In all other analysed cities, quoted rental prices increased slightly (Düsseldorf (+1.1 % to 9.35 €/sq m), Dresden (+2.5 % to 6.15 €/sq m), Leipzig (+1.0 % to 5.10 €/sq m), Essen (+1.7 % to 6.10 €/sq m) and Dortmund (+2.7 % to 5.70 €/sq m)).
The Munich district of Altstadt-Lehel (postcode: 80538) was identified as the most expensive sub market last year, with an average rent of 16.70 €/sq m. Schwabing-Freimann (postcode: 80802) in Munich was in second place (16.40 €/ sq m), while Ludwigvorstadt-Isaarvorstadt (postcode: 80469) in Munich was in third place (16.40 €/ sq m). “Not until we reach the fourth position is there a sub market outside the Bavarian capital: Hamburg HafenCity (20457), with 16.35 €/sq m,” says Kanzler.
On the condominium market, Munich was clearly in first place in 2011 with a weighted average asking price of 4,300 €/sq m. Compared to the previous year, the average price increased by 12.9 percent. Asking prices showed similar positive development in Hamburg (+10.5 % to 3,380 €/sq m), Frankfurt (+10.5 % to 3,370 €/sq m), Düsseldorf (+10.5 % to 2,640 €/sq m) and Berlin (+11.5 % to 2,430 €/ sq m). With the exception of Stuttgart (+6.0 % to 2,640 €/ sq m), all top 6 cities achieved a double-digit growth rate. Dresden only just missed double-digit growth (1,780 €/ sq m) with a rate of +9.2 percent, while Cologne (+5.2 % to 2,240 €/sq m) and Leipzig (+3.5 % to 1,460 €/ sq m) recorded more moderate growth rates in comparison, albeit remaining on an upward trend. In contrast, prices in Essen (-0.7 % to 1,420 €/ sq m) and Dortmund (-0.7 % to 1,330 €/ sq m) more or less stagnated at the previous year’s level.
“In the condominium segment, Munich sub markets were even further ahead of other analysed cities than in the rental market,” says Kanzler. Munich sub markets occupied all top positions, with a peak value of 7,880 €/sq m in the 80801 postcode (including Schwabing-West). “Our analysis by postcode areas revealed considerable increases in rental and particularly purchase prices in some geographical sub markets. In terms of the absolute level, Munich further extended its lead. For example, rents in the cheapest sub market of Munich are more expensive than rents in the prime locations of Dresden, Leipzig, Dortmund or Essen,” explains Kanzler.
City-attractiveness ranking – dynamic rating system
As well as the usual economic and social-demographic indicators such as residents, household numbers, purchasing power and unemployment, the new city-attractiveness ranking (StAR) developed by the NAI apollo group contains a number of residential aspects such as vacancies, new housing needs and price development. At the same time, a new weighting method has been introduced that provides a dynamic rating system of the total 24 indicators.
“StAR considers both the actual situation as well as changes in the most important parameters during the last one to three years as well as expected developments for the future,” says Dr. Konrad Kanzler, Head of Market Research at the NAI apollo group. “This means that StAR is able to identify both strengths and weaknesses in direct comparison with other locations and segment them into status quo, market development and overall rating.” The result of using the statistical weighting method: “As a rule, high purchasing power, low unemployment and high and growing resident and household numbers contribute to the results of the winning cities. Economic prosperity enhances a city’s image and increases immigration, with the consequence that housing becomes scarce and rents and purchase prices rise,” says Kanzler.
Purchase offer prices in Euro / sq m; average of respective year
Most residential portfolio transactions take place in the federal states of Berlin and NRW
As in previous years, demand on the residential portfolio market (> 30 residential units) is particularly high for residential stock in the German metropolises and regional urban centres. As in the last two years, Berlin is at the centre of investment activity: the German capital accounted for around 23% of the assignable portfolio transactions with an investment volume of around €2 billion. Next in line are the cities of Hamburg, Munich, Frankfurt, Düsseldorf and Cologne. “In a breakdown by federal state, a majority 48 percent share of the transactions related to the federal states of North Rhine Westphalia and Berlin,” says Dr. Konrad Kanzler, Head of Research at the NAI apollo group.
German investors account for 67.1 percent of the sales volume
German investors represented the largest investor group in the first half of 2012, accounting for 85.7% of the transactions or 67.1% of the volume. However, international investors also continue to play a special role. Before the financial crisis in 2007, foreign investors were still responsible for 38.4 percent of all portfolio transactions, but this share had fallen to 19.8 percent in 2011. In the first half of 2012, the foreign investor share fell further to 14.3 percent. Nevertheless, this still amounts to 32.9 percent of the volume or 29.3 percent of the traded residential units.
When making a distinction between institutional and private investors, institutional investors accounted for 90.7 percent of the individual portfolio transactions (2011: 80.3%). “However, there has not been a decline in interest from private investors. Asset security, the lack of low-risk investment alternatives, increased liquidity and the long-term security of the current low interest rates remain central arguments for a property investment,” says Kanzler. Instead, Kanzler believes that the reduced activity by private investors is due more to increased competition for smaller portfolios, where the private investor frequently emerges as the loser. “Other private investors do not always buy in terms of potential yields, but are looking for individual ‘select properties’,” said Kanzler.
Positive outlook for the current year
“At this time, a positive outlook must be given for the current year. After a sensational €6.9 billion by the middle of the year, we are forecasting around €10 billion by the end of the year,” says Kanzler. He adds: “There is continuing interest in residential investments from both institutional and private investors, all with high levels of liquidity. Positive framework conditions such as favourable interest rates and the stable economic situation will also not change in the medium term.” Further potential mega deals include the property subsidiary of BayernLB (GBW with around 33,000 residential units) and the state-owned TLG Immobilien GmbH (11,500 units). Besides these large sales, trading in small and medium-sized residential packages will also contribute to a further high level of transaction activities in 2012.
Berlin experiences the strongest rise in quoted rental prices, followed by Hamburg and Munich
In the analysis of 11 large residential locations in Germany, the Bavarian capital of Munich was not only the most expensive residential market with a weighted average quoted rent of 13.10 €/sq m in 2011; quoted rental prices also increased here significantly (+5.6%) compared to the previous year. A stronger increase was recorded only in Hamburg (+5.8% to 11.00 €/sq m) and Berlin (+8.4% to 7.75 €/sq m). Stuttgart followed Munich with an increase of +5.3% to 10.00 €/sq m. The increase was a more moderate 2.2% in Frankfurt am Main (11.75 €/sq m), which is the second-most expensive market among the cities analysed in the report. There was no change in Cologne, where the average rent was still 8.85 €/sq m. In all other analysed cities, quoted rental prices increased slightly (Düsseldorf (+1.1 % to 9.35 €/sq m), Dresden (+2.5 % to 6.15 €/sq m), Leipzig (+1.0 % to 5.10 €/sq m), Essen (+1.7 % to 6.10 €/sq m) and Dortmund (+2.7 % to 5.70 €/sq m)).
The Munich district of Altstadt-Lehel (postcode: 80538) was identified as the most expensive sub market last year, with an average rent of 16.70 €/sq m. Schwabing-Freimann (postcode: 80802) in Munich was in second place (16.40 €/ sq m), while Ludwigvorstadt-Isaarvorstadt (postcode: 80469) in Munich was in third place (16.40 €/ sq m). “Not until we reach the fourth position is there a sub market outside the Bavarian capital: Hamburg HafenCity (20457), with 16.35 €/sq m,” says Kanzler.
On the condominium market, Munich was clearly in first place in 2011 with a weighted average asking price of 4,300 €/sq m. Compared to the previous year, the average price increased by 12.9 percent. Asking prices showed similar positive development in Hamburg (+10.5 % to 3,380 €/sq m), Frankfurt (+10.5 % to 3,370 €/sq m), Düsseldorf (+10.5 % to 2,640 €/sq m) and Berlin (+11.5 % to 2,430 €/ sq m). With the exception of Stuttgart (+6.0 % to 2,640 €/ sq m), all top 6 cities achieved a double-digit growth rate. Dresden only just missed double-digit growth (1,780 €/ sq m) with a rate of +9.2 percent, while Cologne (+5.2 % to 2,240 €/sq m) and Leipzig (+3.5 % to 1,460 €/ sq m) recorded more moderate growth rates in comparison, albeit remaining on an upward trend. In contrast, prices in Essen (-0.7 % to 1,420 €/ sq m) and Dortmund (-0.7 % to 1,330 €/ sq m) more or less stagnated at the previous year’s level.
“In the condominium segment, Munich sub markets were even further ahead of other analysed cities than in the rental market,” says Kanzler. Munich sub markets occupied all top positions, with a peak value of 7,880 €/sq m in the 80801 postcode (including Schwabing-West). “Our analysis by postcode areas revealed considerable increases in rental and particularly purchase prices in some geographical sub markets. In terms of the absolute level, Munich further extended its lead. For example, rents in the cheapest sub market of Munich are more expensive than rents in the prime locations of Dresden, Leipzig, Dortmund or Essen,” explains Kanzler.
City-attractiveness ranking – dynamic rating system
As well as the usual economic and social-demographic indicators such as residents, household numbers, purchasing power and unemployment, the new city-attractiveness ranking (StAR) developed by the NAI apollo group contains a number of residential aspects such as vacancies, new housing needs and price development. At the same time, a new weighting method has been introduced that provides a dynamic rating system of the total 24 indicators.
“StAR considers both the actual situation as well as changes in the most important parameters during the last one to three years as well as expected developments for the future,” says Dr. Konrad Kanzler, Head of Market Research at the NAI apollo group. “This means that StAR is able to identify both strengths and weaknesses in direct comparison with other locations and segment them into status quo, market development and overall rating.” The result of using the statistical weighting method: “As a rule, high purchasing power, low unemployment and high and growing resident and household numbers contribute to the results of the winning cities. Economic prosperity enhances a city’s image and increases immigration, with the consequence that housing becomes scarce and rents and purchase prices rise,” says Kanzler.
| Development of average purchase offer prices for condominiums | |||||||
| City | 2011 | 2010 | |||||
| Munich | 4,300 | 3,810 | |||||
| Hamburg | 3,380 | 3,060 | |||||
| Frankfurt am Main | 3,370 | 3,050 | |||||
| Stuttgart | 2,640 | 2,490 | |||||
| Düsseldorf | 2,640 | 2,390 | |||||
| Berlin | 2,430 | 2,180 | |||||
| Cologne | 2,240 | 2,130 | |||||
| Dresden | 1,780 | 1,630 | |||||
| Leipzig | 1,460 | 1,410 | |||||
| Essen | 1,420 | 1,430 | |||||
| Dortmund | 1,330 | 1,340 | |||||
Purchase offer prices in Euro / sq m; average of respective year
