Investor sentiment turns negative as views on rental markets weaken

Deutsche Hypo's Real Estate Climate Index, which we track faithfully here at REFIRE, saw a trend reversal in December as investors's sentiment towards the market turned negative, moved primarily by their view of rental markets.

The monthly reading fell for the first time since the summer and now stands at 105.1 points. In September, the Index cracked the 100-point mark again on its way up, since the onset of the pandemic in March 2020. Investor sentiment has been rising since then on a monthly basis, until hitting this reversal after reaching 108.3 points in November, a fall of 2.9%.

The 1,200 market experts polled by market researchers Bulwiengesa for Deutsche Hypo seemed to have taken the view that the prospect for rental markets has disimproved. The Rental Climate component fell in December by 4.8%, after jumping by 6.2% to 105.2 index points over October. The Investment Climate also fell by 1%.

For the year as a whole, the picture is positive; compared to December 2020, a very bad time for the coronavirus, the overall index rose by 50%.

The Logistics Climate indicator has showed declining values for three months in a row, stabilising in December at 164.5 points. In other asset classes, too, sentiment is falling. The most significant decline was in the Retail Climate, which fell by 10.6 percent to 62.6 points, after recording the biggest upswing In November, increasing by 12.7% to 70.1 points compared to the previous month.

For the Housing Climate gauge December also brought a decline. The value dropped by 2.4% to currently 150.9 index points. And the Office Climate has now fallen for the fourth month in a row, this time by 1.4% to 106.9 index points. The Hotel Climate also developed negatively, down 1.9% to 76.1 points.

Viewed over the whole year, the individual asset classes have seen some unusual movement, with triple-digit increases in some cases. The Hotel Climate rose by a whopping 279.6% between December 2020 and December 2021, as did the Retail Climate by 125.5%, despite the recurring setbacks since the outbreak of the Corona pandemic. The Logistics Climate remains the top performer across all the asset classes reviewed. 

The Deutsche Hypo Real Estate Climate describes itself a seismographic instrument that recognises economic turning points in the real estate market at an early stage, provides important information for strategic economic action and enables the evaluation of future market developments.

Both the real estate climate and the partial climate values are measured in counter points. The scale of the real estate climate ranges from 0 to 200 counter points. From the individual components of the survey response, an independent climate value (office climate, logistics climate, etc.) is calculated for the real estate segments office, retail, residential, logistics and hotel, which indicates the mood and confidence in this segment. Values below 100 indicate increasing uncertainty or scepticism.