Trends and insights of the residential market in Germany
The impact of the Corona pandemic has kept us all on edge longer than we imagined in the middle of last year. At the same time, there has been a massive increase in the amount of capital being invested in residential real estate. On the one hand, the "Wall of Money" profits from the continuing loose monetary policy of the major central banks, but on the other hand it also benefits from increasing risks and growing uncertainty in other asset classes. It is therefore all the more pleasing that residential investments have proven to be resilient to the crisis in recent quarters.
We have not only observed that experienced residential market investors have maintained, and sometimes even increased, their exposure, but we have also noted a significant increase in the number of investors. For example, several major investment managers, previously active only in commercial asset classes, have now invested in residential real estate or are currently in the process of setting up related funds and infrastructure. The realization is becoming increasingly widespread that, compared with other asset classes, residential investments are associated with comparatively low risk, secure cash flows and stable long term demand.
It is therefore not surprising that 2020 saw the all-time, second-best investment volume and that this positive trend has continued in the first quarter of the current year. The consequence of high demand is continued price increases for core products. This applies to both project developments and attractive existing properties in good locations. From the buyers' point of view, long-term security and substantial liquidity are the main factors in residential investment decisions. Relatively low yields, accepted as a logical consequence given the advantages outlined above, do not change this.
However, it is even more important to be able to back up investment decisions with well-founded and detailed information. Our customers responded positively to the initial report we published last year and it has shown that we have struck a chord with institutional investors and made an important contribution to greater transparency. We are therefore pleased to present the second edition of our German Residential Report and hope you enjoy reading it.