Slight uptick in Deutsche-Hypo-Index in April

There has been a slight uptick in the Deutsche-Hypo-Index, which is ‘as stable as possible’ going into the second quarter of 2017 at 132.5 points, the German lender announced earlier this month (April).

The index rose by a moderate 0.3% month-on-month. ‘It will be interesting to see whether the property climate is taking a little breather from its downwards trend or whether it’s actually starting to move upwards again,’ said Andreas Pohl, chairman of the board of managing directors at Deutsche Hypo.

The hotel and retail sectors are showing the most growth, according to the index, up 2.5% and 3.1% respectively month-on-month. The retail sector is benefiting from the ‘first positive signals’ since November last year, according to Deutsche Hypo. Logistics was the biggest downwards mover, down 1.9% to 141.6 points. Residential property was down 0.7% at 154.3 points, followed by offices, which fell by 0.4% to 141.4 points.

‘Hotels are popular because yields are better than for offices, although that gap has closed considerably,’ said Pohl. ‘However, investors need a different skill set to invest in hotels, not least because they have a different risk profile to offices.’

Last month, the Deutsche-Hypo-Index fell for the third consecutive time to its lowest level since 2012. The investment climate fell by 4.5%. The retail sector fell by 7.6% to its lowest level since March 2010. Even the stable residential sector fell by 5.5%.

Such movements are largely due to investors becoming more cautious, according to Pohl: ‘Investors won’t buy just anything anymore,’ he said. ‘There is geopolitical uncertainty, which can have an impact, and prices have become high. Investors have rightly become more cautious – they do more research before committing to a deal.’

Deutsche Hypo prefers to lend in Germany’s ‘Big 7’ and also offers development finance, providing the project is partially pre-let, Pohl said, adding that Deutsche Hypo wouldn’t finance anything – in any sector – above 10,000 sqm if it wasn’t pre-let.

‘This year, we’d like to do between €3b and €3.5b in new business,’ he said. ‘We’re quality rather than volume driven’. Last year, the lender underwrote €4.6b in new loans.