October 04, 2018

EVIC-Investor Pulse 2018: Approximately 2/3 of investors expect the price increase to continue

EVIC-Investor Pulse 2018: Approximately 2/3 of investors expect the price increase to continue

The majority of investors in Germany expect further increases in real estate prices with no end in sight. This is based on results of the recent online survey of semi-professional and institutional investors in Germany, which was conducted by RUECKERCONSULT engaged by Engel & Völkers Investment Consulting (EVIC). Close to two thirds of investors expect prices to further increase. While in the previous year about 60 percent expected stagnating or decreasing prices in the short and mid term, only one third of the respondents believes now that the price peak has been reached; even fewer participants thought this to be true for B and C locations.

"The prices will further increase in most asset classes – even though partially slower. Compared to last year’s survey, the majority does not see an end to the price increases," elaborates Andreas Ewald, Managing Director of EVIC. “This estimation is supported by the statement of nearly half the investors to further focus on acquisition”, adds John Kamphorst, responsible for the investor’s survey and Member of the Board of EVIC.

Another result of the survey: approximately 52 percent of investors plan to invest in the suburban area of megacities and 48 percent state to further engage in investments in B locations. In contrast, only 38 percent plan to intensify investments in Top 7 locations.

Investment focus: About half of the questioned investors (49 percent) plan to acquire residential properties in the next twelve months. Also, office buildings (38 percent) and innovative residential concepts (39 percent) appeared in the focus of investors. On the other hand, about a third of respondents plans to decrease investments in retail.

Alternative strategy: Approximately 75 percent of respondents agree with the statement that the lack of product pushes investors into special-purpose properties and new utilisation concepts. Especially in the residential sector product is scarce in all types of locations according to the survey participants. All investors see too little supply on the market in the Top 7. Therefore, over half of the investors (60 percent) plan to adapt their investment strategy. In the special-purpose properties section, health care assets are seen as a sustainable investment product, while only 16 percent of respondents see co-working spaces as a sustainable product.

About 23 percent of respondents consider a shift into different risk segments, for instance Value-Add. A fifth stated to be looking into a change to a different location. Only 13 percent consider the option to invest abroad, majorly from the Private Equity sector.

Financing: The questioned investors pay attention to achieving a balanced ratio of equity and capital borrowed in real estate investments. 41 percent of respondents finance their real estate investments with loans of 26 to 50 percent. A third of investors finances very conservatively with an equity share of over 50 percent. Only a quarter applies more than 75 percent of debt to their investments.

About the survey: Conducted for the fourth time, 2018 is the first time that the online survey investigates investment markets throughout all asset classes. The participants stem from approximately 230 companies with a homogenous mix of different risk clusters and asset classes.

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