According to Savills, the German residential sector saw transaction volumes of €7.5bn in 2023 (transactions of at least 50 apartments). This is around 38% less than in the previous year and the lowest transaction volume since 2011. Of this €7.5bn, around two billion, or more than a quarter of the total investment volume, was attributable to the minority interests taken by Apollo in two Vonovia portfolios.

The total number of transactions halved compared with the previous year and remained relatively stable over the course of the year at around 20 to 30 transactions per month.

Karsten Nemecek, Managing Director of Corporate Finance – Valuation for Savills Germany, says: “Following a prolonged phase of major uncertainty, we are once again witnessing somewhat stronger demand from investors, particularly for new residential property. In addition to family offices and private investors, institutional investors are also active bidders in the market. In view of lower pricing combined with very robust fundamental data and the prospect of further rental increases, investors are viewing the current situation as a favourable window of opportunity. The high construction costs for the foreseeable future also support the notion that capital values are likely to rise once again.”

From an occupier perspective, the situation in the rental apartment market is likely to become even more strained. Matti Schenk, Associate Director of Research for Savills Germany, says: “Last year brought sharp rental increases and vacancy rates will have fallen further in many locations. In view of declining building permit figures and record-high cancellations of residential developments combined with further growth in the number of households, there is currently nothing to suggest a trend reversal. The housing shortage will increase further over the coming years and most owners can assume that rents will continue to rise.”

Marco Högl, Director and Head of Residential Capital Markets for Savills Germany, says: “Prior to the commencement of interest rate hikes, some new residential properties in sought-after residential locations were achieving multipliers of 35 times net annual rent or more. Multipliers for such properties now typically range between 23 and 25. This means prices have reached a level at which a variety of investor groups are willing to make acquisitions. We assume that prices will settle at this level for the time being.” The prime yield moved sideways in the fourth quarter according to Savills, standing at 3.6%.

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Market in Minutes: Residential Market Germany