Notwithstanding the generally poor financial and economic situation, the mood in Germany's real estate industry has kept rising in February, even if just slightly: The survey-based Real Estate Climate of the monthly King Sturge Real Estate Economy index showed a small 8.8% growth for the second month in row, and now stands at 47.2 index points (compared to 43.4 points the previous month).
The brightened prospects of the Real Estate Climate are essentially explained by the sudden 15.4% leap of the Investment Climate, which shows 40.5 points after 35.1 points the previous month. These are the findings of the February poll among 1,000 market players that the independent market research company BulwienGesa AG conducted on behalf of King Sturge. The cautiously optimistic mood in the industry is also reflected in the slowing downturn of the Real Estate Economy index, which is based on macro-economic data: It dropped by no more than a fraction, from 124.8 down to 122.9 points.
"One reason for the boost to the Investment Climate is the mounting pressure to invest, but also the rising interest that many market players are showing in solid real estate investments because liquid capital just waiting to be invested is in ample supply, and alternative investments on the capital market are not very attractive at the moment," said Sascha Hettrich, Managing Partner of King Sturge Deutschland. "What is more, many players seem to think that the formation of a stable base for the price development particularly for office real estate is within reach. Decisive now is to pick the right moment for an anti-cyclical investment." In face of the highly volatile stock markets, many high net worth investors are remembering the advantages of real estate as a comparatively stable-valued asset, Hettrich went on to say. "Here, the German market with its stable parameters and a sound risk/reward ratio presents a better picture than some of the other markets."
Hettrich closed by suggesting: "While the mood and the economic data remain on a low level for the time being, there is every reason to sound a note of cautious optimism. It is now of the essence that the loan and financial market to send positive signals."
The Real Estate Climate, which reflects the valuation and assessment by market experts, finally bottomed out in January 2009 after a six-month nosedive. That January was followed by a moderate 8.8 percent increase from 43.4 to 47.2 points in February 2009 suggests there is hope among the respondents that the real estate economy will stabilise in the near future. In addition to the Investment Climate, the Rental Income being the second sub-indicator of the Real Estate Climate similarly manifested an upward trend in February, and currently reads 54.1 index points (previous month: 51.9 points).
Among the sub-segments, office real estate scored the highest upswing. Here, the mood climbed from 24.8 up to 27.8 points. Notwithstanding this slight recovery, the ramifications of the economic crisis are still most keenly felt in the office segment. The most stable valuations then as now were awarded to the residential segment: At 95.8 points, it exceeds the previous month's figure of 86.4 points by 10.9%. The polled experts appraised retail real estate with 47 index points in February, leaving the previous rating more or less in place (January: 45.5 points).
The Real Estate Economy index, which is based on statistical analyses of DAX, ifo, DIMAX, and interest rates, suffered but a minor decline in February. At 122.9 points, this latest rating undercuts the previous month's figure of 124.8 points by all of 1.5%, more or less pulling level with the state of affairs in late 2002 or in early 2003. In this regard, the Real Estate Economy mirrors the unrelieved tension on the stock and financial markets, and yet it has definitely checked its pace and is approximating a lateral development.
Source: King Sturge