Deutsche Hypo’s Real Estate Climate declined for the fifth consecutive time. Political uncertainties are worrying interviewed real estate experts. The decline of the Investment Climate was particularly rapid, but Hotel Climate and Logistics Climate also suffered serious setbacks. Only one segment bucked the trend.

The Real Estate Climate is based on a poll among 1,200 German market experts, similar to the ifo Business Climate index, but specifically for the real estate industry. The idea underlying the poll is to capture the sentiment in the real estate industry based on a few questions. The Real Estate Climate is used as an early indicator facilitating the compilation of short-term forecasts.

According to the latest poll, the degree of uncertainty is rising. With real estate experts taking a rather bleak view of the market, the drop amounted to 1.9 % overall. The last time a lower level was registered dates back to November 2012. The cumulative trend is still relatively moderate at minus 10 % because a look at the historic record shows greater setbacks in the past that happened over shorter periods of time. Still, it is quite evident that the climate is approaching the 100-points mark (July: 114.9 points). The trend is driven mainly by the Investment Climate, which dropped by 3.7 %, whereas the Rental Climate has remained stable.

Why is that? Naturally, many players in the real estate industry are quite content with the current peak cycle of the market. But at the same time, most are well aware that this development will not continue much longer. The external factors are too fragile. For one thing, the EU Commission in its recently published “Summer 2019 Economic Forecast” points out the growing risks created by global trade tensions and political uncertainties, which are likely to hamper growth during the remainder of the year. Similarly, the Business Climate Index published by the Munich-based ifo Institute for Economic Research a few days ago documents the deteriorating sentiment in the Germany economy.

Residential Climate Reclaims Lead Position

In the generally negative dynamic of the Real Estate Climate in July, only the Residential Climate took exception to the trend. Boasting a gain of 3.6 %, the assets class recovered from the plunge it had taken the previous month and moved back into the lead. The Office Climate presented a comparatively stable picture with a decline by just 0.7 %. Conversely, the Logistics Climate suffered a serious setback (-5.9 %) and dropped down to third place in the ranking. The level of this asset class has not been this low since November 2014. Only the Hotel Climate registered a yet-steeper drop: Compared to the previous month, the assessment by real estate experts deteriorated by 6.8 % down to a new all-time low. The Retail Climate also followed a reverse trend. After a comparatively stable performance in recent months, it now experienced another sharp drop (-5.1 %).

For more details and the latest report, go to https://www.deutsche-hypo-immobilienklima.de

Contact person: Tobias Kassner, head of division at bulwiengesa, kassner [at] bulwiengesa.de und Felix Schrader, project manager at bulwiengesa, schrader [at] bulwiengesa.de