The Brexit referendum, global economic concerns and political crises are among the many potential triggers for a summer of turbulence in the capital markets. In addition, the German real estate investment market is likely to be approaching its cyclical peak. Should property investors, therefore, follow the stock market maxim “sell in May” and exit the German market or at least dispose of certain assets? There are good arguments both for and against such measures.
The signs are strengthening that initial yields are close to their cyclical lows despite the continuing expansionary monetary policy. While yields in Germany hardened slightly further during the first quarter, those in the UK softened for the first time since 2009. This is undoubtedly a consequence of the uncertainty associated with the Brexit referendum and does not yet constitute a trend reversal in our opinion. However, it does demonstrate that the downward pressure on yields has now relented. Yields in Germany are also expected to reach their trough during the course of the year. For property owners, this means that capital growth is unlikely to make any further notable contribution towards total returns. In the longer term, the yield component may even have a negative impact on total returns.
Source : Savills