Residential is the strongest asset class in the first half of 2026

The German residential investment market can look back on an overall solid first half of 2026. In the first six months, around €4.4 billion was invested in residential portfolios of 30 units or more. This means that the result is only slightly below the previous year's level (-3%). At the same time, however, the structure of the market has become much broader: While the previous year was characterized by a few large-volume portfolio transactions, the number of trades has risen in the current year. Although the financing environment has recently become more volatile again, the fundamental conditions remain in favour of the housing market, so that demand for resilient residential investments remains high. This is the result of the analysis by BNP Paribas Real Estate.

"After the first half of 2026, the residential investment volume amounts to €4.4 billion. The already discernible brightening of investor sentiment led to a moderate revival of market activity in the second quarter. Although the share of large-volume, nationwide portfolio transactions required for a significant recovery remains low, it has increased compared to the first quarter," explains Christoph Meszelinsky, Managing Director and Head of Residential Investment at BNP Paribas Real Estate GmbH, adding: "At the same time, the second quarter shows that larger nationwide portfolios are also coming to an end again: After a nationwide portfolio in the first quarter, In the Deiker Höfe and part of the Holsten site, only new construction or forward deals in the size segment of over € 100 million were registered, four large existing portfolios outside the A-cities were implemented in the second quarter. This highlights the return of larger value-add transactions. Despite economic weakness and geopolitical risks, the residential investment market continues to benefit from strong user market prospects and high investor demand. A well-filled deal pipeline is likely to further stimulate market activity in the coming months."

Despite the aforementioned portfolio deals, large-volume transactions of more than €100 million, with a share of 34%, are contributing less to the overall result than at any time in ten years, albeit with a recent upward trend. At the same time, medium-sized deals of up to €50 million dominate the market and, at 47%, account for significantly more investment volume than the long-term average (Ø 10 years: 33%). The residential investment market is thus supported by a broad transaction base, which underlines the lower dependence on individual deals and the overall stable market condition.

After the first half of the year, the residential transaction volume is no longer as evenly distributed among the individual sub-segments as it was at the beginning of the year. Existing portfolios account for the largest market share at 47%, which is above the long-term average (Ø 10 years: 44%). Forward deals follow with a share of 21%, but fall short of previous years. This is not so much due to declining investor demand as to a recently more volatile financing environment and a limited supply of suitable products. At the same time, the continuing high demand for ESG-compliant residential properties underlines the attractiveness of modern properties: new buildings and new portfolios achieve an above-average market share of 18% (Ø 10 years: 5%). With a transaction volume of just over €770 million, this sub-asset class also achieved the highest result ever recorded in a first half of the year.

In the first half of the year, the investment volume is again more widely distributed among the various buyer groups than at the beginning of the year. Investment and asset managers make the largest contribution with a market share of 31% (Ø 10 years: 14%). With a transaction volume of around €1.3 billion, they have thus reached the highest level since the peak of the previous market cycle in 2021/2022. In second place are real estate companies, which achieve a result of 17% or around €740 million, which is similar to the last 2020. Equity/real estate funds and the public sector also make a significant contribution to the total volume, each accounting for around 14%.

The A-locations contributed a good €1.6 billion to the overall result in the first half of the year compared to the previous year. However, with a market share of 38%, the value remains below the long-term average (Ø 10 years: 46%). With a transaction volume of just under €600 million, Berlin once again occupies its top position. This is followed by Düsseldorf and Hamburg in second and third place with around €325 million and €320 million respectively. At the same time, some B locations are also showing increased market dynamics: Leipzig and Dresden each achieve transaction volumes in the mid three-digit million range, which is mainly due to large-volume portfolio transactions.

In the second quarter, net prime yields for new-build properties rose moderately compared to the previous quarter. The increase ranges between 5 and 10 basis points, depending on the location, marking the first discernible movement since the end of 2024, with Munich and Berlin being the most expensive locations (3.50%; +5 bps). This is followed by Frankfurt (3.55%; +5 bps), Hamburg (3.65%; +5 bps), Stuttgart (3.70%; +10 bps) as well as Düsseldorf (3.75%; +10 bps) and Cologne (3.90%; +10 bps).

So far this year, medium-sized transactions in particular have dominated market activity, while large-volume, nationwide portfolio sales have so far only made a limited contribution. Although demand remains concentrated on core and core-plus investments, there is an increasing activation of the value-add segment as well as the first major portfolio transactions outside the A locations, which indicates a gradual broadening of the market. At the same time, opportunistic strategies are likely to come back into focus as the market stabilises. In particular, internationally active investors, including Anglo-Saxon market participants, are showing increasing interest and are likely to expand their acquisition activities in the further course of the year.

The market environment remains fundamentally supportive despite economic weakness and geopolitical uncertainties. On the demand side, the fundamentals remain intact: a persistently high demand for housing meets a still limited volume of new construction, which further exacerbates the supply bottleneck, especially in the top locations. As a result, rental price dynamics can be expected to continue, which will support the excess demand in both the short and medium term and further underpin the attractiveness of the asset class. Residential real estate thus once again confirms its role as a resilient investment haven in a volatile environment. At the same time, however, it can be observed that the recent slight increase in financing costs and the moderate increases in yields continue to influence pricing processes, resulting in transactions being implemented more selectively.

"We assume that the market recovery will continue in the further course of the year and that the transaction volume will increase moderately. A well-filled pipeline, increasing activities also in the value-add segment and the gradual return of larger transactions suggest that the market will continue to broaden and receive additional impetus," says Christoph Meszelinsky, summarizing the prospects.