Despite economic and geopolitical uncertainties, the investment market for residential properties continues to show remarkable stability. For investors, this market remains one of the most attractive asset classes, supported by solid fundamentals, high excess demand on rental markets and capital again becoming increasingly available. In major cities in particular, the shortage of residential space ensures stable income and long-term potential for value appreciation. With a half-year volume of more than 4 billion euros, residential real estate once again confirmed its role as Germany’s strongest asset class.
In addition to conventional apartment blocks, the focus is increasingly on alternative forms of housing. They offer investors the opportunity to diversify their portfolios with future-ready investments and, at the same time, to generate above-average yields. Operator models (e.g. micro and senior living) have long since evolved out of their niche and are benefiting from social trends, such as mobile living, an aging population and the growing influx of international students. Yield premiums are still possible at present compared to established residential investments, but are likely to fall as the market matures. Those who invest now are well- positioned to benefit from these opportunities and the long-term stability of fundamental data.
Student living: strong demand offers investment opportunities
Student housing is a particularly dynamic segment of the micro living market. Small, fully equipped apartments, located in urban areas are high in demand with students, young professionals, commuters and international experts. However, international students in particular find it difficult to access the regular housing market – and their numbers are growing steadily.
Analyses from JLL show that there is an enormous shortage in student housing across major European cities. In the 40 surveyed cities of 16 countries, there is an unmet demand of around 1.2 million beds at present. On average, only 14 percent of the students live in purpose-built student accommodation. Over the decade, the number of student apartments has slightly grown in the five biggest European countries, but the number of students has increased by a multiple in the same period. Thus, the needs for investment are huge: according to JLL, the unmet demand represents an investment opportunity of about 450 billion euros.
The situation is set to worsen. JLL forecasts that the number of students will grow by a further 10 percent to 23.5 million in the EU key markets by 2030/31. This would mean an additional two million students in need of housing solutions, which is nearly the total number of beds available today.
The pressure of student housing demand is very high in Rome, Paris and Warsaw, but also German metropolitan cities such as Cologne, Berlin and Hamburg – are among the most undersupplied markets. London, Paris and Barcelona appear to be particularly attractive investment markets.
When it comes to investment potential, the German cities of Berlin, Potsdam, Munich, Freiburg and Frankfurt am Main rank top. Huge barriers to entry on the free rental market, low fluctuation and long-term strong demand ensure that university cities will have a considerable need for additional student accommodation in the foreseeable future. Berlin and Munich score high, due to their excellent academic programmes and international appeal. Yet opportunities are also opening up outside Germany. With its growing economy, young population and a structurally undersupplied housing market, Dublin, for example, is considered a particularly promising micro living location.
Senior living: demography as a driver of growth
While student accommodation is primarily driven by mobility and internationality, growth in the senior housing segment is based directly on demographic trends. In the EU, the share of people aged 65 and over has grown, from 16 percent in 2004 to 22 percent in 2024, and is expected to reach about 27 percent by 2040, as reported by the statistical office of the European Union, Eurostat. In Germany, according to the German Office of Statistics (Destatis), every fifth person is already older than 66.
As the population ages, the need for age-appropriate residential options is growing. However, there is a shortfall in the supply of specialist housing for older people. Most European countries fall well short of the quotas for care home places (five percent for senior citizens aged 65 and above and 20 percent for elderly people aged 80 and over) recommended by the World Health Organization (WHO). In particular in Spain, Portugal, France and Germany growing demand meets tight supply. Attractive markets are emerging where demographic ageing meets high purchasing power, for example in the Nordic countries and Western Europe.
The market figures also underline the momentum: in the first half of 2025, healthcare properties in Germany changed hands for around 1.1 billion euros, more than three times the previous year's figure, according to JLL. Nursing homes dominate, accounting for almost 90 percent of the transaction volume. A shortage of skilled workers and the weak creditworthiness of some operators are also hindering new construction, resulting in a net loss of bed capacity. For investors, the picture is clear: demand increases, while supply stagnates.
Conclusion
Alternative forms of housing, such as student living or senior living, have become an asset class on their own, but are at the beginning of their market development.
With a stable demand, limited supply and attractive yield prospects, they are among the most exciting segments in the European real estate market. Institutional investors are set to benefit from current income, value appreciation potential and an optimized portfolio diversification.
Real I.S. applies a targeted approach to profit from this momentum. Its range of products includes the Real I.S. Ireland Residential Fund for investments in the Irish growth market and MODERN LIVING, a real estate fund that invests in traditional residential assets and alternative forms of housing such as micro apartments. The open-ended real estate fund REALISINVEST EUROPA offers retail investors the possibility to benefit from these growth segments. Real I.S. enables different types of investors to reap the opportunities presented by investing in alternative forms of housing.