French election result has positive impact on Deutsche-Hypo-Index

France’s general election earlier this month, in which centrist Emmanuel Macron defeated Marine Le Pen to become France’s youngest ever president, has had a positive impact on the Deutsche-Hypo-Index this month, according to Deutsche Hypo’s chairman of the board of managing directors, Andreas Pohl.

‘The tension surrounding the French general election was high, especially given some unexpected election results last year,’ Pohl said. ‘It’s certainly conceivable that the French election result had a positive impact on our index this month. People were relieved that he won.’

The index rose in May by 0.6% to 133.3 points, a high that has not been reached since April last year. This month – unlike last month – both the rental and investment climates contributed to the uptick. The rental climate figure outpaced its investment climate counterpart, rising by 0.9% m-o-m to 129.8 points, compared to growth of 0.3% (136.8 points) for the investment climate.

‘The trend at the moment is a sideways move,’ Pohl said. ‘The investment climate in Germany is slowly on the up and that is reflected in the figures this month.’

However, the trading climate is showing no signs of slowing its downward trajectory, a course it has been on since November last year. It fell by 3.7% in May to 98.1 points, thereby dropping below the 100-point level.

Nonetheless, it is not all doom and gloom. The office market has bounced back following three consecutive months of losses, rising 2.4% in May to 144.8 points, marking a provisional high for 2017. The hotel market grew by 2.1% to 133.9 points. Residential property reversed its downward trend and rose by 0.2% to 154.7 points. Logistics increased by 0.3% to 142.1 points.

Unlike France’s recent presidential election, the election earlier this month in Germany’s most populous state, North Rhine-Westphalia, coupled with elections in two other states since March, are not having a big impact on German business or Deutsche Hypo’s index, Pohl said. ‘They are local rather than federal elections, so we shouldn’t overestimate their importance, even if the results were unexpected.’

Earlier this month, Angela Merkel’s CDU party won a state election in their centre-left rival’s heartland, North Rhine-Westphalia, in a stinging blow to Social Democrat (SPD) challenger Martin Schulz. The CDU won 33% of the vote in the election for the state legislature, with the Social Democrats taking 31.2%.

The result marked a new low for the SPD, whose ratings soared after Schulz, former president of the European Parliament, was nominated in January as Merkel’s challenger. However, defeats in two other state elections since late March have since cast a shadow over his nomination. The SPD result in this month’s election - the last before the national vote in September - was the party’s worst in North Rhine-Westphalia since the Second World War. In the state’s previous election in 2012, the SPD beat the CDU by 39.1% to 26.3%.

Going forward, 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 €3bn and €3.5bn in new business,’ he said. ‘We’re quality rather than volume driven’. Last year, the lender underwrote €4.6bn in new loans.