Most important target market in Europe: Germany is a magnet for global residential investors

Germany has consolidated its position as the most important European target market for residential investors. This is the conclusion of a recent study by JLL analyzing the global residential real estate investment market. Only the United States ranks higher than Germany in the global rankings.

The study forecasts transactions valued at $1.4 trillion over the next five years. Germany occupies a key position in this, offering investors unique investment opportunities due to its market size and maturity .

"With approximately four million residential units, the German housing market has the largest portfolio of institutionally held residential real estate in Europe," explains Emma Rosser, EMEA Head of Residential Investment Research. The share of residential investments in the total transaction volume has averaged 29 percent over the past five years. This still has room for improvement compared to other countries, Rosser adds.

Michael Bender, Head of Residential JLL Germany, sees further growth for the German market: “ The German residential real estate market offers excellent prospects for investors due to its size, liquidity and the continued excess demand in cities .” In the coming years, JLL expects increasing transaction volumes and more diverse investment strategies.

Large transactions shape the German residential market

Large-scale transactions are characteristic of the German market – almost half of the transaction volumes over the past five years were deals with more than $100 million. Around 90 percent of investments went into multi-family housing, but international investors are increasingly tapping into submarkets such as student housing.

The JLL study ranked the 15 largest residential investment markets worldwide based on market maturity, growth potential, and demand. Eleven of these 15 leading markets are located in Europe. One notable feature is that most countries are only achieving 60 to 75 percent of their national new construction targets—a structural problem that is further fueling demand for existing properties.

A key growth driver is the projected development of urban households. According to JLL, Germany will have the highest number of urban households in Europe by 2035, spread across several major cities. "This offers investors good opportunities to quickly achieve economies of scale," explains Rosser.

Overall, JLL forecasts that an additional 16.4 million new urban households will be created in Europe by 2035. The current investor-owned stock would cover only four percent of this projected demand, which underscores "the sector's immense growth potential," according to Bender.

The study also shows that institutional investors will play an important role in addressing the housing shortage. JLL expects an additional five million rental apartments to be completed by investors over the next five years, bringing the total rental stock to over 50 million.

Alongside Germany, the US and the UK occupy the top spots in the global ranking. While the US is the largest market, with more than one trillion US dollars in transaction volume over the past five years, the UK leads the ranking in terms of growth potential.

You can download the full study here.