There are many indications on the German real estate market that the market is currently entering a recession phase and a new cycle on the real estate market is promising.
The mood among real estate experts has changed in the wake of soaring interest rates, high construction costs and a weak economy.
According to a report published by the German Institute of Economics (IW) for the industry association ZIA, many companies were concerned that the real estate market would change. “There is evidence that the market is entering a downturn phase, which is initiating a new cycle in the real estate market,” the authors wrote.
The real estate sentiment index calculated by IW fell from 30.7 points in the first quarter to minus 5.5 points in the second quarter, and thus fell to negative values for the first time since its publication in 2014. “This means that the mood on the executive floors of German real estate companies is much worse than during the Corona pandemic,” he said. in the “Handelsblatt” study.
In the residential segment, the climate on the real estate market has deteriorated particularly. The main theme is the growing interest in construction, which has made apartments and houses less accessible to private households. “The lower affordability could lead to a sustained decline in prices and demand,” says IW. FMH-Finanzberatung calculated that the average effective interest rate for ten-year loans rose above the 3 percent mark for the first time since 2012.
The sentiment index also fell for project developers, in the retail and office real estate sectors. After the office market hit the pandemic hard, many companies were concerned about significantly lower demand and falling prices and rents.
There is also bad news for tenants, according to the report: 80 percent of surveyed housing companies expect rents for their properties to increase. The main reason is high inflation. (dpa)