Empira Research: Stabilisation in German residential investment market amid economic tensions
Germany’s residential investment market is showing signs of recovery, according to the latest report from Empira Group. The Swiss-based investment manager reports an impressive €5.9 billion in investments across residential portfolios with 30 or more units in Germany for the first three quarters of 2024, marking a 50% year-over-year increase. Yet, as demand pressures mount in major cities, the sector’s future remains uncertain.
Despite ongoing inflation control measures, the German economy faces challenges, with the government revising its 2024 growth projection to -0.2%. In contrast, the U.S. economy is set to grow by 2.5%, a stark comparison against Germany’s cautious outlook. “Germany’s economic climate shows stagnation signs, but in the real estate sector, we’re beginning to see price stability and rising demand,” commented Prof. Dr. Steffen Metzner, Empira Group’s Head of Research. Metzner noted that in the U.S., economic forecasts are heavily tied to the approaching presidential election, adding layers of uncertainty.
Residential Market Demand Grows Amid Supply Shortfalls
Supply shortages are further straining Germany’s top metropolitan areas. The new construction sector remains cautious, with the business climate index barely above last year’s figures. In August alone, 50.6% of companies reported order deficits, while cancellations affected 11.7% of firms. New housing completions are on a downtrend, with expectations dropping from 225,000 units this year to 175,000 by 2026.
Even with these constraints, residential investment in portfolios over 30 units rose notably, though it remains 51% below historical norms. “The market appears to be gradually stabilising,” stated Metzner, noting investor interest remains high even as long-term volumes remain below average.
Rental Prices Climb in Germany’s Major Markets
In Germany’s top-tier cities, rental rates are rising, outpacing the national index, which recorded a 2.2% increase over the past year. Frankfurt and Hamburg led the trend, with rents climbing by 5.1% and 4.2%, respectively. Meanwhile, purchase prices in major cities are mixed, with notable declines in Hamburg (-7.5%) and Cologne (-3.0%), while Berlin, Munich, and Stuttgart saw stable prices.
While uncertainties persist, Empira’s data indicates resilience within Germany’s residential investment market, offering cautious optimism for investors navigating the economic complexities of 2024.