Residential real estate in Europe: investors see potential in Berlin

Langenhagen, 15 August 2019  |  News

The European residential investment market performed well in 2018. Overall, the transaction volume in European cities grew by 40 percent compared to the previous year. One third of the capital invested in Europe was attributable to Germany. The first place in European city ranking is taken by Berlin.

According to Jones Lang LaSalle (JLL), 56 billion euros was invested in Europe’s residential investment markets in 2018, an increase of 40 percent compared to 2017. Investors were particularly attracted by the top 20 major cities in Europe. A good 20.4 billion euros, or a good 35 percent of all investments, flowed into Europe’s major cities. With a transaction volume of 3.11 billion euros, Berlin was able to assert itself as the strongest location. With respectable distance follows Copenhagen in second place. 2.43 billion euros were invested in the Danish capital.

Investors focus on Germany

Not only Berlin, but also Frankfurt (5th place), Hamburg (8th place), Dusseldorf (12th place) and Munich (13th place) were among the investors’ European top 20. Although Great Britain could even place six cities in the top 20, Great Britain cannot compete with investments in Germany. One third of the capital invested in residential real estate was placed in German cities (+ 38% to 18.6 billion euros). The invested sums of the two following countries Great Britain (+150% to 6.7 billion euros) and the Netherlands (+35% to 5.6 billion euros) were much lower.

According to JLL, Germany benefits above all from the federal structure with several major cities and numerous industrial locations. Spain and France each placed two locations, Denmark, Austria, Ireland and the Netherlands placed one location each in the top 20 European cities.

Increasing investments from abroad

The main reasons for the positive financial outcome in 2018 were the activities of foreign investors in the European residential investment market. JLL also expects a positive development in the long term due to current socio-economic developments – such as decreasing household sizes and increasing urbanisation. “The sector’s performance as a defensive investment will attract even more attention from investors looking for stable cash flow and diversification benefits, given technology-driven disruptive trends in, for example, the retail and office sectors,” said Jones Lang LaSalle.

Forecasts for the investment market

Especially due to the low yield correlation and the many attractive opportunities for project developers, the interest in European residential investments will hardly decline in the coming years. “But investors have also become more active in the wider living spectrum. Long-term demographic data support the development of these sub-sectors. They enable investors to capture a wide variety of age profiles. Student residences, care homes or co-living solutions offer institutional investors a broad range of investment opportunities with different risk-return profiles. Not only high current yields play a role, but also a lower regulation and thus a higher potential for rental growth in the short term. This is partly the result of shorter rental periods, often less than a year. Demand for these products will increase significantly in the short term,” predicts JLL.

Langenhagen, 15 August 2019  |  News
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