The ongoing debt crisis in the euro zone does not seem to have impacted the sentiment in the real estate industry. While the survey-based Real Estate Climate of the King Sturge Real Estate Economy Index did soften for the first time since February 2010 as it dropped by 0.1% from 137.0 to 136.9 index points, the change is actually too negligible to suggest actual movement.
In any case, the latest score keeps the Real Estate Climate now for the sixth consecutive month far above the 100-point threshold that signals positive ratings from the majority of the roughly 1000 market experts polled.
The indicator for acquisition and investment decisions yielded slightly as it fell by 2.0% to 143.2 points (down from 146.1 the previous month), yet at the same time, the market players identified a higher potential in regard to income and rent rates in November. This caused the Rental Income, the second sub-indicator of the Real Estate Climate, to climb by 2.0% and to achieve its highest score since March 2010 at 130.6 index points (up from 128.1 points the month before).
"The development of the Real Estate Climate suggests that, while the faith in the current business development among market players has remained on a high level, the increased economic risks stand in the way of a further rise in sentiment in regard to user demand and rent rate development," commented Sascha Hettrich, Managing Partner of King Sturge Deutschland
When comparing segments, the Office and Retail Climate suffered minor losses of 1.2 and 0.4%, respectively, though both received predominantly positive ratings. The Office Climate returned a score of 123.6 points in November (last month: 125.1), the Retail Climate a score of 140.4 points (last month: 141.0). The Industrial Climate achieved the biggest gain at 4.0%, climbing to 129.6 points (last month: 124.6). At 164.5 (last month: 160.5), the Residential Climate rose to its highest level since the survey started in January 2008.
"Unlike the slightly darkened sentiment in the real estate economy, the upturn continued in terms of hard facts," observed Hettrich. The Real Estate Economic Situation Index, reflecting the statistical analysis of the ifo business figures, DAX, Dimax, and interest rates, gained by 2.2% as it rose to 204.6 index points (compared to 200.1 points last month). This roughly matches the level in fall of 2007, just before the onset of the economic and financial crisis.
"Having been grouped with the slowest-growing countries in Europe for the past decade, Germany has suddenly re-emerged as the country of miraculous economic recoveries," concluded Hettrich. "Yet the growth statistics should be scrutinized more closely. An estimated growth of 3.7% growth this year become is put in perspective when you compare it to the 4.7% dip of the gross domestic product (GDP) in 2009, though it is definitely positive when compared to the situation in other European countries. The fact that the boom is mainly attributable to exports goes to show that the domestic economy still has a lot of catching up to do. At the same time, the growth in exports is slowing noticeably. In a word, we are not exactly looking at an economic miracle."
Source: King Sturge
