Despite the deep recession, the King Sturge Real Estate Economy Index compiled monthly has gone up again in June.
In its latest survey, the sentiment indicator improved by 6.0%, from 55.6 up to 58.9 index points. What is more, the positive trend of the Real Estate Economy Index is supported by all the indicator values surveyed. In addition to the Investment Climate, which rose by 8.7% to 61.3 points, and the Office Climate, which rose by 15.3% to 38.4 points, Rental Climate, Retail Climate and Residential Climate all registered gains. Finally, even the Real Estate Economic Situation, based on macroeconomic fundamentals such as DAX, Ifo, DIMAX, and interest rates, perked up for the third time in as many months. At 130.6 points, the June index exceeded the previous month's index by 2.6% (127.3 points). In strictly technical terms, this would qualify as a shift in trend. The Real Estate Economy Index is compiled by the independent consulting agency BulwienGesa AG on behalf of King Sturge once a month.
"The cautious but sustained optimism in the industry in regard to the future development of the real estate markets mirrors the hope that the most severe economic crisis in 60 years has bottomed out, and that the economic situation will stabilize by fall. The optimistic findings of the Real Estate Economy Index match those of various other positive sentiment indicators in the economy, including the latest Ifo business climate index or the ZEW index," said Sascha Hettrich, Managing Partner of King Sturge Deutschland.
He went on to say that the renewed substantial increase of the Investment Climate from 56.4 to 61.3 index points suggests that many respondents evidently feel the time has come for an anti-cyclical entry into the real estate market. "What matters now is that the cautious optimism gets all the backing that government and financial industry can muster. A sustainable recovery will be quite impossible without a relaxation of the financial markets," Hettrich added.
He pointed out that a hesitant attitude in expectation of further drops in entry prices continues to prevail. "We will not see large-scale investments and transaction volumes of any size until the glad tidings of a cautious optimism among market players have reached the loan industry. "This is why confidence-raising measures in the banking sector should continue to have chief priority," said Hettrich.
The surprisingly high increase of the Office Climate by 15.3% from 33.3 to 38.4 index points documents the revived confidence that the poll participants have even in the future of the office markets, if on an admittedly low level. The 3.3% increase of the Retail Climate to 58.2 points (compared to 56.3 points the previous month) is comparatively moderate, as is the performance of the overall Rental Climate with its 3.1% rise to 56.5 points (previous month: 54.8).
The lowest increase of the current survey was scored by the residential segment, which perked up by just 0.9%, from 110.2 up to 111.2 index points. Then again, this asset class with its reputation of being comparatively "crisis-resistant" kept reporting substantial gains in sentiment throughout the foregoing months. This goes to show that the expectations vested in the prospective development of individual asset classes tends to presage imminent market events.
"For the time being, core products continue to top the shopping list of most investors. Particularly the residential real estate business is beginning to report transactions here and there again, even if their volume remains limited to the level of smallish block sales," Hettrich concluded.
Source: Business Network Marketing- und Verlagsgesellschaft
