Germany’s housing market adjusts to permanent scarcity
Germany's housing shortage has now definitively crossed an important line. What was once treated as a cyclical undersupply
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Wertgrund Immobilien has suspended redemptions in its open-ended public residential fund WohnSelect D. The decision directly affects a largely German retail investor base, but it also carries broader significance, highlighting the strain that subdued transaction markets and tight financing conditions continue to place on liquidity management across Germany’s real estate sector.
With effect from 15 January 2026 (12:00 CET), investors can no longer redeem or subscribe to shares in the fund. Under Section 257 of the German Capital Investment Code (KAGB), the suspension may last for up to 36 months, although Wertgrund stresses this is a legal maximum rather than a target. The fund currently has a net asset value of around €290m and holds about 1,700 residential units alongside a small number of commercial properties.
Wertgrund is the first provider of an open-ended public real estate fund to take this step since the interest-rate turnaround. The company frames the move as a preventive liquidity measure rather than a response to acute distress.
The figures leave little room for interpretation. Since the start of the rate tightening cycle, WohnSelect D has paid out €147.5m to investors, equivalent to 31.6% of net fund assets. Pending redemption requests amount to a further roughly 21% of current volume.
At the outset of the crisis in August 2022, the fund stood at €457m. Since then, redemptions have been met almost entirely through asset sales rather than fresh inflows. New subscriptions over the past two years, according to management, were limited to a low single-digit million euro amount. Gross liquidity stood at 7% as of August 2025.
To service outflows, Wertgrund sold five properties for €98m, including assets in Dresden, Berlin and Hamburg. Two additional sales processes were halted in the second half of 2025. Management insists this was not due to price disagreements, but because transaction timelines had become incompatible with expected cash outflows.
CEO Thomas Meyer points to a renewed deterioration in market velocity since mid-2025. Buyer financing has become more restrictive, transaction processes are taking significantly longer, and the buyer universe for larger assets above €50m has narrowed sharply. In December, the fund’s exchange-traded share price fell from around €100 to roughly €72, underlining investor unease.
Wertgrund’s central argument is straightforward: without a suspension, redemption requests would increasingly have to be met through sales under time pressure, risking value erosion for remaining investors.
The company emphasises the need to balance the interests of investors seeking liquidity against those with a long-term horizon. The explicit objective is to reopen the fund once redemption behaviour, transaction markets and financing conditions allow, not to exhaust the full three-year suspension period.
Management also points to the fund’s long-term performance record. Since its launch in 2010, WohnSelect D has generated cumulative value growth of just over 105%, including gains of 57% over ten years.
Beyond the individual case, the suspension at WohnSelect D sharpens attention on the wider open-ended fund universe. Many German open-ended real estate funds entered the rate turnaround with comfortable liquidity buffers, but those buffers have been steadily eroded by sustained redemptions and slower-than-expected asset sales. The Wertgrund decision suggests that, for smaller and mid-sized vehicles in particular, liquidity management is moving from a background discipline to a front-line strategic issue.
For other GOEF managers, the message is not that closures are imminent, but that timing matters. Funds with heavy redemption queues, limited distribution reach or concentrated portfolios may face similar trade-offs if transaction markets remain sluggish into 2026. Larger platforms may buy time through scale and sales capacity, but even they remain exposed to prolonged market inertia.
The move will also be closely watched by regulators. Post-crisis reforms were designed to make redemption suspensions less likely, not to eliminate them altogether. The use of Section 257 KAGB in a residential fund, years after those reforms, is likely to heighten supervisory sensitivity around liquidity forecasting, redemption communication and investor expectations.
For investors, the episode reinforces a distinction that has blurred over the past decade. Open-ended residential funds offer long-term exposure to structurally undersupplied housing markets, but they do not provide unconditional liquidity. In a higher-rate environment, access to capital is increasingly sequenced, not continuous.
Taken together, WohnSelect D looks less like an outlier than an early indicator. Further liquidity events, if they occur, are more likely to follow a staggered pattern — first among smaller vehicles with limited sales flexibility, and only later, if at all, among the sector’s largest funds. The market is not breaking, but it is still recalibrating.
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