EXPO REAL: European Residential, Student Housing & Micro Living Investment Briefing A2.232 - International Investors Lounge by PropertyEU - EXPO Real, Messe München GmbH, Messegelände, Munich, 81823, Germany | 10:30 - 11:30

Resi investment ‘attractive across Europe’

The unstoppable urbanisation trend is making residential investment very attractive across Europe, delegates heard at the PropertyEU European Residential, student housing and micro living investment briefing, which was held at EXPO REAL in October.

‘From an investor’s point of view residential delivers rock-solid, non-volatile returns,’ said Rainer Nonnengasser, CEO MPC Micro-living Development. ‘But there is so much capital floating around looking for opportunities that prices have gone up. We have seen substantial increases in Europe, particularly in Germany, so investors have to be very selective.’

The urbanisation trend is affecting all of Europe and all age groups, he said: ‘Some cities are more magnetic than others, they attract people and there is never enough accommodation. To avoid being stuck with the wrong asset, investors have to choose very carefully what they are looking for, if short stay, student housing, micro living o traditional resi, as they all have different risk/return profiles.’

Past forecasts were wrong and did not take into account the inflows of immigrants and students all needing accommodation, said Thierry Beaudemoulin, CEO Germany, Covivio. ‘They said the population would shrink in Germany, but demographics have changed. Investors must be selective, because the increase in resident numbers will be in the top 7 cities, while other locations may shrink.’

Germany is the biggest residential market in Europe but the rest of the continent offers many opportunities as well, said Dan Pottorff, managing director, LaSalle Investment Management: ‘The lending market is too strong in Germany, we prefer to look at countries where the financing capital is missing, like Portugal or Spain. We also believe France is interesting and Italy too, not necessarily the main cities but the good university towns that are always popular.’

Micro housing or student housing are both attractive asset classes, Pottorff said: ‘More development is taking place now, but there are still opportunities out there because workers are mobile and the number of international students arriving is growing. We like anything that has a strong operational angle.’

The urbanisation trend is leading to interesting developments as both students and workers prefer to live in the city centre. ‘We are transforming part of our residential buildings into co-living spaces for short-term lets, six months to a year,’ said Beaudemoulin. ‘Co-living is here to stay, it creates a community and gives people the flexibility they want.’

Some local authorities try to facilitate this trend, said James Welsh, inward investment executive, Invest Aberdeen: ‘Sites that were ear-marked for office development are now being turned into purpose-built student accommodation. The market has changed in the city and planning regulations have become more flexible. Aberdeen’s master plan aims to bring residential back into the city centre.’

Thanks to increasing demand, student housing has now become an established asset class. ‘In the last 12 months we have seen more institutional investors, attracted by the liquidity of the sector,’ said Stefan Kolibar, head of marketing, StudentMarketing. ‘Over 500 companies are now active in the student housing space, including Blackrock, LaSalle, Axa, Patrizia and Union Investment.’

Investors are attracted by yields of 5% to 7%, which are higher than other asset classes, he said, and transaction volumes have increased ten-fold since the financial crisis to around €7 bn a year.

‘The key driving factor is the constant growth of students coming from Asia or Latin America,’ said Kolibar. ‘They are attracted by the combination of low student fees, affordable accommodation and the rising quality of higher education in Europe.’

Young European are also increasingly mobile. ‘There are now 9 mln working-age Europeans moving across Europe, so demand constantly outstrips supply,’ he said. ‘We see the best opportunities where the imbalance is biggest, like Lisbon, Milan, Paris and Barcelona, but Berlin remains one of the hottest markets.’