German transactions fall by 32% in Q1 but market remains 'safe haven' – GPP

Germany’s seven major cities have had a muted start to the year, with total transaction volumes in the first quarter down by a third compared to a year ago, according to research by German Property Partners (GPP).

The overall volume of €4.85 bn (excluding residential transactions) was 32% less than the figure for the first quarter of 2018. GPP spokesman Guido Nabben said the reduction reflected the ‘very good real investment year in 2018’. Volumes for the current year were likely to be ‘well below’ 2018 but there was no sign of a sharp decline, he added.

Berlin bucked the trend with a 149% increase in its transaction volume to around €2.1 bn. Portfolio sales across the seven locations increased by 53%, indicating increased activity by foreign buyers in the market.

Berlin's total of €2.15 bn gave it a clear lead over Munich, which saw its transaction volume shrink by 67% to €654 mln, followed by Frankfurt on €641 mln, a 58% fall. Hamburg just edged out Düsseldorf with €460 mln despite a 65% drop, while the Rhine city's total of €435 mln was 22% down on 2018. Stuttgart's transaction volume was down by 25% at €400 mln, while Cologne experienced the biggest fall of 70% to €120 mln.

Yields remain stable at a relatively low level of 3.03%, a decline of 0.19 percentage points since last year, with Hamburg delivering the smallest yields of 2.8% compared to 3.3% in Stuttgart.

Office properties are the most sought-after asset class, accounting for 75% of total transactions.

The share of transactions by international investors was 37%, equivalent to the first quarter of 2018, having dropped to 32% by the end of the year. Forward deals accounted for 12% of the overall volume, compared to 14% a year ago.

Nabben said the German market was profiting from its record as a safe destination for investment capital in an uncertain global climate. ’Investment pressure on the investor side remains very high. Against the background of the weakening global economy and uncertainties such as Brexit, the German real estate market is a safe haven for many investors.

‘Financing conditions for real estate products remain favourable in 2019 following the recent announcement by the European Central Bank that interest rates will not be raised. In the course of the year, we therefore expect a good result, albeit well below the level of 2018.’


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