Philipp Langbehn of KGAL explains why professional investors should invest in residential real estate and related products. However, investors shouldn't wait too long, as many bargain hunters have already begun to take advantage of the low prices.
For institutional investors, the residential sector is considered a safe haven in the real estate segment due to the steadily increasing demand for housing and stable income. Its share of the investment volume has therefore grown rapidly, from approximately twelve percent in 2014 to 22 percent in 2024.
“Even in the challenging market environment following the interest rate turnaround, residential investments have demonstrated greater resilience compared to other real estate segments. While transactions have declined noticeably in the short term and gross initial yields have risen by an average of around 125 basis points, according to market reports from the real estate firm JLL, there are already initial signs of a return to growth,” writes Philipp Langbehn, Portfolio Manager Real Estate at KGAL, in an article exclusively available to “Institutional Money”.
According to Langbehn, investors from the US, UK, and Asia are becoming increasingly active, as they view the higher yields coupled with moderately declining interest rates as an attractive entry point. "European institutional investors are – unfortunately – still holding back. Let's take a look at the fundamentals," explains Langbehn.