Authors
Publication Date
Key Words
Related Topics
Financial Markets
Real Estate Market
Economic Policy in Germany
Residential real estate is the largest asset on many household balance sheets, but each investment is tied to specific local markets. Using GREIX data for apartment prices since 1995, this report examines whether diversification across German cities would historically have improved the risk-return profile relative to a market-weighted portfolio.
The results show that the market-weighted portfolio is already well positioned in historical risk-return space. Optimized portfolios, however, would have allowed higher price growth at comparable risk. At the same time, their composition changes markedly with the market regime: different cities contribute to efficiency in different phases. Spatial diversification therefore remains valuable, but portfolio decisions should explicitly account for the prevailing market environment.
