In April, the monthly King Sturge Real Estate Economy Index showed an ambivalent development. Having continuously pushed upward from its historic low-point in December 2008 during the three opening months of this year, the survey-based Real Estate Climate dropped from 52.9 points in March to its most recent value of 51.4 points.
By contrast, the Real Estate Economic Situation, based on hard economic data, rose for the first time since July 2008 as it climbed from 118.8 to 121.9 points. These are the findings of the April poll that King Sturge commissioned BulwienGesa AG, an independent market research company, to conduct among 1,000 market participants.
"The reticent mood in April documents the panel members' awareness that a further substantial deterioration of the economic situation implies a serious risk potential for the real estate markets," said Sascha Hettrich, Managing Partner of King Sturge Deutschland. He went on to say that even now the demand for office and retail floor space in particular manifests a substantial decline that has impacted rent rates, too.
A case in point, the Office Climate dropped by 5.6% down to 30.2 index points (compared to 32.0 points the previous month). A more critical view was also taken of retail-related real estate: The Retail Climate stood at 52.6 points (down from 55.5 points the month before). "By contrast, residential real estate continues to go against the trend," Hettrich elaborated. The Residential Climate crossed back into the three-digit range, registering 102.4 points in April (previous month: 101.5 points). It is a signal suggesting that the majority of the poll participants maintain a positive, expectant attitude. Hettrich observed: "In the eyes of many investors, the development of residential real estate suggests long-term stability, promising a stable cash flow and with it a regular, secure income."
In analogy to the 2.8% drop of the Real Estate Climate, the Rental Income as sub-indicator of the Real Estate Climate slipped by 7.9% and clocked 50.2 points in April (previous month: 54.5 points). The polled real estate experts regard the prospective rent rate performance with skepticism. Yet the second sub-indicator, the Investment Climate, rose from 51.4 to currently 52.6 index points. "The feeling that many investors especially the high net worth ones are evidently lying in wait for attractive buying opportunities is again borne out by the recovering Investment Climate," suggested Hettrich. "Up by 2.3% in April, this sub-indicator rose for the fourth consecutive month." In his eyes, many leads are clearly interested in committing themselves even if a reticent attitude continues to dominate because of the expectation that entry prices will erode further.
There are other goods signs emanating from the macro-economic data. For instance, the RE Economic Situation, which is based on the statistical evaluations of DAX, ifo, DIMAX, and prime interest rates, experienced its first surge since July 2008. At 121.9 points, the April rating exceeded the 118.8 points of March by 2.6%. "So there is reason to hope for a stable basis to form soon and for the markets to calm," commented Hettrich.
Source: Business Network Marketing- und Verlagsgesellschaft
