8 1 0 2 / 1 1 T K A P M O K n e s y l a n A - R S B B Latest results of the BBSR Housing Transaction Database Purchasing activity for The first half of 2018 was characterised by a further stagnation in transactions on the German housing market. The number of sales continued to fall. rented housing units However, for the first time since 2016, a major transaction was performed with around 25,000 housing units, thereby causing the overall purchasing continues to stagnate in volume to rise. the first half of 2018 This document presents the current analysis of the BBSR Housing Transaction Database, including results and analyses on housing portfolios in the first half of 2018 with the following focuses: n Slight increase in the transaction volume in the first half of 2018 n Private investors are the only active buyers‘ group on the market n Falling number of small transactions Author Jonathan Franke 22 Purchasing transPaucrtcihoanssi fnogr arecntitveidty h foour srienngt esdto hcokuss iinn gth uen fiitrss tc hoanltfi noufe 2s0 1to8 s |t aSglingahtte in icnr tehaes fier isnt thhael ft roafn 2s0a1c8t i|o Fno rveowluomrde Foreword Dear readers, Since the late 1990s, trading in rented housing portfolios and entire housing companies has grown steadily and become a subject of increasing interest 88 11 to the general public. The BBSR records current market events in its Housing 00 22 // Transaction Database. Every six months, we publish analysis results on the 11 11 development of transactions and the market structure. T T KK AA PP In the first half of 2018, the number of transactions relating to rented apartment MM OO portfolios continued to fall, although the trading volume increased slightly. Only KK n n few portfolios were on sale and investors’ demand far exceeds the supply. The ee ss number of transactions for small portfolios between 100 and 800 housing units yy ll aa also fell. Listed public companies continue to dominate the market. In the first nn AA half of the year, they were responsible for the only major housing transaction -- RR with more than 10,000 housing units. SS BB BB We hope you find this publication interesting. Dr. Robert Kaltenbrunner Deputy Director of the Federal Institute for Research on Building, Urban Affairs and Spatial Development BBSR Housing Transaction Database The BBSR database has been recording housing portfolio transactions with 800 units and above since 1999. Since the second half of 2006, it has also recorded transactions with smaller housing portfolios of between 100 and 800 units. The database is developed through systematic research of a range of print and Internet sources. The data sources are regarded as reliable. Despite the good quality of the sources and careful processing, the BBSR assumes no liability, gua- rantee or warranty for the correct, complete nature of data in the Housing Transaction Database, or its suitability for a specific purpose. Slight increase in the transaction volume in the first half of 2018 Sales activities on the German The BBSR Housing Transaction Single major transaction significantly housing portfolio market declined Database shows that in the first half increases transaction volumes slightly in the first half of 2018. of 2018, fewer transactions were 8 While the number of transactions recorded than in the preceding The significant increase in the 1 0 continued to fall, the number years. Thus the trend of recent transaction volume is the result of the 2 / 1 of traded housing units increased. years is continuing, as the number of first major transaction (over 10,000 1 T The reason for this is a takeover transactions has fallen for the fifth housing units) since 2016. In the K A in the public listed housing year in succession: while there were spring of 2018, Vonovia SE took over P M corporation sector. 51 transactions in the whole of 2013, around 91 % of the Austrian BUWOG O K that figure fell by around a third to 33 AG in two stages, representing a n e transactions in 2017. In the first half volume of around 24,700 traded s y of 2018, only 11 transactions were housing units. In 2017, there had been l a n recorded, so a further reduction can no transactions of that size. Vonovia A - be expected for the full year 2018 SE was also responsible for the last R S (see Fig. 1). acquisition of that order, when it B B took over a large share of Conwert However, the sales volume, i.e. the Immobilien Invest SE in December number of traded housing units, has 2016. actually increased. In the first six months of 2018, 49,200 housing units The takeover of BUWOG AG is a were traded in portfolios of 800 units major transaction that forms half of or more (see Fig. 2). Thus, 84 % of last the entire sales volume during the year‘s trading volume has already first half of 2018. In the second boom been achieved by mid-year. period between 2012 and 2015, major Figure 1 Sales transactions by portfolio size, 2005 to H1 2018 No. of transactions 80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 Portfolio sizes in housing units 800 to under 2,000 5,000 to under 10,000 25,000 and above 2,000 to under 5,000 10,000 to under 25,000 Note: Sales of large housing stocks of 800 units and above are recorded. Source: BBSR Housing Transaction Database © BBSR Bonn 2018 4 Purchasing transactions for rented housing stocks in the first half of 2018 | Slight increase in the transaction volume Figure 2 transactions with 10,000 units and Sold housing units by portfolio size, 2005 to H1 2018 above still decisively influenced the No. of housing units market volume, with a proportion of 400,000 between 61 % and 74 %. In 2016, that 350,000 proportion fell to 35 % and last year 300,000 it was 0 %. By comparison, medium- 250,000 sized rented housing portfolios play 200,000 only a minor role with respect to 18 the volume of traded housing units 0 150,000 /2 in the first half of 2018. The four 1 1 100,000 transactions with between 800 and T K 50,000 2,000 units represent only 8 % of A P 0 all housing units sold. In 2017, the M 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 O 2018 significance of the 22 transactions in K Portfolio sizes in housing units n 800 to under 2,000 5,000 to under 10,000 25,000 and above that category had been considerably se 2,000 to under 5,000 10,000 to under 25,000 higher at 45 %. y l a Note: n Sales of large housing stocks of 800 units and above are recorded. A With respect to the number of - R S transactions, however, medium-sized Source: BBSR Housing Transaction Database © BBSR Bonn 2018 B portfolios continue to dominate: four B sales were carried out in the segment between 800 and 2,000 housing units, while there were five in the next Figure 3 higher category of 2,000 to 5,000 units. Thus, the two categories together Sold housing units by portfolio size and average traded portfolio, H1 2016 to H1 2018 form over 80 % of recorded sales. No. of housing units Av. portfolio size Nevertheless, this figure represents 80,000 6,000 a considerable reduction compared 70,000 to the two previous years, which 5,000 were characterised by low market 60,000 activity and few transactions in those 4,000 50,000 segments (2016: 90 %, 2017: 97 %). 40,000 3,000 During that period, portfolio sales in the 800 to 1,000 segment alone 30,000 2,000 represented two thirds of all sales, 20,000 while in the first half of 2018, they 10,000 1,000 only account for a third of recorded transactions. 0 0 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 800 to under 2,000 5,000 to under 10,000 2,000 to under 5,000 10,000 to under 25,000 Average portfolio size Note: Sales of large housing stocks of 800 units and above are recorded. Source: BBSR Housing Transaction Database © BBSR Bonn 2018 Purchasing transactions for rented housing stocks in the first half of 2018 | Slight increase in the transaction volume 5 Average portfolio size activity, the past six months stand out at least with respect to sales values – growing with a larger transaction volume: the as market dynamism also decelerated almost 50,000 traded housing units and transaction activities almost The low number of sale transactions represent the second highest half- ceased completely. and the comparatively higher number year value and are only surpassed of sold housing units in recent years in the second half of 2016, when Nevertheless, the background to also have an effect on the average 60,000 units were traded on the those two low periods is different: 8 size of the traded housing portfolio, transaction market (see Fig. 3). In with the onset of the global 1 0 which is now noticeably larger at 2017, approximately 27,000 and 31,000 economic and financial crisis in 2 / 1 4,500 units compared to the average units were sold respectively, which 2008, the financial sector acted more 1 T in the previous two years, which are significantly lower levels. cautiously and investors hardly found K A ranged between 2,500 and 1,800 units any purchasers for their stocks; by P M per transaction. The current value However, it would be inaccurate to contrast, there has been a strong O K is still significantly lower than the speak of new market dynamism in shortfall in the supply of offers for a n e overall database average of 5,700 this context. The number of sales number of years, with great interest s y traded housing units and far from continues to be low and hardly any on the demand side. l a n the average values achieved during portfolios are offered for sale on the A - the two booming periods, with up to market. Furthermore, the takeover of R S 14,000 traded units per transaction. BUWOG AG was a major transaction B B that forms half of the entire traded volume. Without that stand-out Half-year perspective transaction, the sales volume would highlights growth in have stagnated at the level of trading volumes six-monthly values in 2017. Further transactions of that magnitude are Looking only at the values of the past not in sight at present. The current five half-year periods since the end period resembles much more closely of the second boom in transaction the trough between 2008 and 2011 – 6 Purchasing transactions for rented housing stocks in the first half of 2018 | Private investors the only active buyers‘ group Private investors the only buyers‘ group active on the market Private investors define the Public sector not active rented housing portfolios on the German transaction market. Above on the market German market are experiencing all the group of public listed a shift in stocks between different corporations determines the market Of the 3.38 million traded units private parties pursuing contrasting dynamism. Some parties are active recorded by the BBSR Housing strategies. The Federal Government both as buyers and as vendors Transaction Database, private and federal states were last involved 8 1 investors were the key active group on an individual basis in 2016, both 0 2 / during the observed period, with on the vendor and buyer side, having 1 1 87 % of bought and 63 % of sold previously sold public stock, mainly T K housing units. For many years, until 2013. A P private investors have dominated the M O German transaction market, while In recent years, there has been K n the public sector has been noticeably regular municipal activity on the e s withdrawn. German transaction market, albeit y l a mostly on a small scale; there have n A Once again in the first half of 2018, been no large sales for a number of - R S private investors are the dominant years. Instead, many municipalities B group of buyers and vendors: all –especially on tense markets – B eleven purchases were carried out have become more aware of the by that group. Nine sales were also importance of their own stock to performed by the group, while both housing policy and are looking to of the vendors in the remaining two expand stocks with new construction transactions are unknown. Thus, measures and by buying project developments. One new BBSR research initiative is studying that development: the ExWoSt project “Expanding municipal housing stock Figure 4 as a strategy of housing policy” systematically studies the different Number of sold housing units by vendor type, 2005 to H1 2018 strategies of municipalities and their No. of housing units housing associations in expanding 400,000 their stock. The project will continue 350,000 until 2020. 300,000 250,000 Listed real estate 200,000 corporations as market participants 150,000 100,000 Instead, private participants with a 50,000 variety of investment backgrounds currently play a decisive role on 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 the German transaction market: all 2018 Municipalities Federal govt. / States of the 49,200 purchased housing Private (German) Private (Anglosphere) units and all sold housing packages Private (continental European) Private (pulic listed company) where the vendor is known were Private (unclassified) Other made by that group (see Fig. 4). Sales Note: Sales of large housing stocks of 800 units and above are recorded. are dominated by private owners without classification, above all the Source: BBSR Housing Transaction Database © BBSR Bonn 2018 shareholders of BUWOG AG, which Purchasing transactions for rented housing stocks in the first half of 2018 | Private investors the only active buyers‘ group 7 was largely owned by free-float in succession. German investors as it has done in recent years, with shareholders before the takeover by bought 5,900 units in the first six the takeover of BUWOG AG. However, Vonovia SE. Furthermore, continental months of this year. In this context, listed real estate companies are not European private investors were ZBI AG should be mentioned since only expanding their stock through active with 9,200 units, representing together with Union Investment, it takeovers; they also use the current 8 around 20 % of the market volume, acquired 5,000 housing units for the excess demand to sell housing 1 0 as well as listed public corporations public fund UniImmo: Wohnen ZBI packages that do not form part of their 2 / 1 without controlling ownership, with in the first half of the year, including core stock to optimise their portfolio. 1 T 5,900 housing units (12 % market purchases from Vonovia SE. For instance Vonovia SE and Adler K A share). German and Anglosphere Real Estate AG, the two companies P M corporations have hardly sold that carried out the greatest additional O The strategies of real K any of their stock: with 2,000 units purchases in the first half of 2018, also en respectively, they each represent 4 % estate companies sold stock. Vonovia SE sold almost s y of sold housing units. 3,500 units in Zwickau and the Upper l a n Consolidation of listed housing Palatinate region, while Adler Real A - On the buyer side, listed companies corporations was further advanced in Estate AG has sold a large proportion R S dominate, as has been the case in the first half of 2018. Vonovia SE has of its non-core stock to Benson Elliott B B recent years: 35,000 housing units continued to expand its housing stock, Capital from Great Britain. were purchased by real estate companies, which thereby form the most important group of buyers for the fourth year in a row (see Fig. 5). In recent years, their share of the market volume has been between 28 % and 59 %, but in the first half of 2018, that figure even increased to 71 %, underlining their growing importance in recent years. In addition to Vonovia Figure 5 SE, another active investor with a Number of sold housing units by purchaser type, 2005 to H1 2018 major transaction was Adler Real No. of housing units Estate AG: in March, it acquired 70 % 400,000 of Brack Capital Partners, which 350,000 has a portfolio that includes former municipal housing in Leipzig as well 300,000 as extensive stock in the Ruhr region 250,000 and northern Germany. 200,000 Furthermore, Anglospheric 150,000 companies participated on the 100,000 German transaction market with 13 % of purchased housing units, while 50,000 German investors represented a share 0 of 12 %. Anglospheric companies 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 bought 6,300 additional units in three Municipalities Federal govt. / States transactions. Thus, as in 2017, their Private (German) Private (Anglosphere) Private (continental European) Private (pulic listed company) trade balance saw a slight increase in Private (unclassified) Other the fist half of 2018 at over 4,000 units. Note: Previously, Anglospheric investors Sales of large housing stocks of 800 units and above are recorded. had sold more housing units than the Source: BBSR Housing Transaction Database © BBSR Bonn 2018 number of purchases for seven years 8 Purchasing transactions for rented housing stocks in the first half of 2018 | Falling number of small transactions Falling number of small transactions Like major transactions for Lowest half-year balance (see Fig 6). The result is therefore 800 housing units and above, the for four years around 25 % lower than the market number of sales of small housing volume in the two respective half- packages has also declined. Due The number of small transactions year periods in 2017 and highlights to the low overall transaction for between 100 and 800 housing the declining transaction activity. volume, their market share of units recorded by the BBSR Housing In the last five years, the average 8 1 the overall trading volume is never- Transaction Database has fallen half-year transaction volume was 0 2 / theless above average. for the first time in three years 11,900 housing units; the last time the 1 1 and represents the lowest level number of traded units was below T K since the first half of 2014. While 10,000 was in the first half of 2014. A P market dynamism with respect to M O small housing stocks remained K Traded portfolios n high in recent years despite the e s change in trading with portfolios becoming smaller y l a with 800 units or more, it is now n A becoming apparent that there is Not only the number of recorded - R also a shortage of available housing transactions decreased in the first S B portfolios in the smaller portfolio six months of this year, but also the B segment. The number of registered sizes of traded housing packages. small transactions in the first half For instance 33 of the 36 transactions of 2018 fell to 36 sales.1 In the last – i.e. 92 % of sales – were portfolios four years, the respective number of with 100 to 500 housing units. That transactions was always at least 40. represents the highest proportion since small transactions were The number of traded housing units recorded. There were only three (1) It should be noted that the coverage rate of actual transaction activity and the was also the lowest half-year result transactions with portfolios of 500 to researched transactions deteriorates with falling transaction numbers. since 2014, with 9,900 traded units 800 housing units and these only just Figure 6 Sold housing units and transactions (up to 800 units), 2008 to H1 2018 Sold housing units in 1,000s No. of sales 45 90 40 80 35 70 30 60 25 50 20 40 15 30 10 20 5 10 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 Portfolio sizes in housing units 100 to under 500 500 to under 800 Transactions 100 to under 500 Transactions 500 to under 800 Note: Sales of large housing stocks of 800 units and above are recorded. Source: BBSR Housing Transaction Database © BBSR Bonn 2018 Purchasing transactions for rented housing stocks in the first half of 2018 | Falling number of small transactions 9 exceeded the threshold with volumes housing packages since they cannot completing the groups of participants of just over 500 units. The segment’s draw on regional knowledge of the with respect to small transactions: share of the transaction volume is market and local networks. both are responsible for 5 % of thereby 16 %, which is significantly purchases, and 15 % and 11 % lower than in previous years. respectively of sales. Companies participating 8 1 0 both as buyers and Several investors acted both as 2 1/ German companies vendors vendors and buyers, underlining the 1 T especially active assumption that many are not only K A Publicly listed companies that have expanding their stock, but also using P M Private companies dominate decisively influenced the German current the high prices to sell stock O K the market activities as vendors transaction market in recent years that is not part of their core portfolio. n e and buyers in the sector of small also play a key role in small sales in For instance Accentro Real Estate s y transactions for stock between 100 the first half of 2018: their proportion AG, Domicil Real Estate and Deutsche l a n and 800 housing units in the first half of market activities in recent years Invest Immobilien GmbH, among A - of 2018. They are responsible for the has been between 5 % and 10 % others, all acted both as buyers and R S transaction dynamism, with a majority of sales and between 12 % and vendors. B B of sales (58 %) and all the purchases 18 % of purchases. In the first half (100 %).2 Their importance with of 2018, listed companies without respect to overall transaction activity a controlling shareholder sold 500 has thereby increased further: while housing units (5 % of the market in recent years, there were several share) and also purchased 1,500 (2) The low level of vendors is above all due to small transactions where public housing units (15 % of the market the fact that there is very little information on vendors among small transactions. In the participants were active as vendors share). The ownership group of first half of 2018, almost half of all vendors and buyers, in the first half of 2018, Anglosphere and continental are unknown. the public sector has completely European investors is also active (3) The vendors are unknown in around half of withdrawn from that market segment. as vendors and buyers, thereby all small transactions in the first half of 2018. Above all German companies are active on the transaction market with small portfolios. In the first Figure 7 six months of 2018, they sold 2,600 and purchased 5,700 housing units, Sold housing units and share of small transactions re. representing a market share of 27 % total activity, 2008 to H1 2018 and 58 % respectively.3 Although No. of housing units Share of small transaction domestic owners were already the 400,000 45 % key group of investors in recent 350,000 40 % years, their current market share 300,000 35 % 30 % 250,000 once again exceeds their previous 25 % 200,000 level. Deutsche Invest Immobilien 20 % 150,000 GmbH, arsago Real Estate and Magna 15 % 100,000 10 % Asset Management purchased small 50,000 5 % housing portfolios in two transactions 0 0 % each. In recent years, many current 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 purchasers also participated on the Portfolio sizes in housing units market as buyers and have been 100 to under 800 units 800 units and above able to expand their housing stock Share of small transactions (re. total activity) despite the fact that there are hardly Note: any available portfolios. By contrast, Sales of large housing stocks of 800 units and above are recorded. some foreign buyer groups have Source: BBSR Housing Transaction Database © BBSR Bonn 2018 had particular difficulties with small 10 Purchasing transactions for rented housing stocks in the first half of 2018 | Falling number of small transactions Importance of small sales are major transactions with between 100 and 800 housing units transactions continues more than 800 housing units. In the was 17 %, which was thereby at to be above-average second boom period between 2012 times significantly lower than the two and 2015, the market share of major preceding annual levels of 31 % and In the first half of 2018, a total of transactions was almost 40 %. The 20 %. However, it is far higher than 47 sales with more than 100 housing current market activity is dominated the level between 6 % to 9 % during units was recorded, representing by small transactions with respect to the years of the second boom period a total number of 59,100 traded the number of sales. of transaction activity until 2015. housing units. More than three The long-term average since small quarters of transactions are in the The market volume continues to be transactions were recorded is 12 %. 8 1 segment of small sales of portfolios determined by major transactions. Thus the value for the first half of 2018 0 2 / with fewer than 800 housing units. In the first six months of 2018, is slightly above that average. 1 1 By comparison, around a quarter of the market share of transactions T K A P M O K n e s y l a n A - R S B B