New Survey

Real Estate Sector Still Booming... For Now

  • Why it matters

    Why it matters

    There have been suggestions that Germany is entering a property bubble, but the new survey casts doubt on that.

  • Facts

    Facts

    • The survey responses produced a record-high index indicating the current state of business in the real estate sector.
    • The survey polls about 120 industry players.
    • Respondents were not very optimistic about financing conditions, with a majority expecting them to worsen.
  • Audio

    Audio

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Baukräne vor Hochhauskulisse
Construction cranes are a common sight in German cities like Frankfurt. Photo: DPA

Real estate sector responses to the latest survey by the Cologne Institute for Economic Research (IW Köln) are positive. The index for the current state of business in the entire industry rose to a record value of 89.5 points in the fourth quarter of 2016. This means that the balance of good and bad assessments of the situation is closer to the maximum of 100 percent than ever before.

“Any other outcome would have been surprising, because the underlying conditions couldn’t have been better,” said Michael Voigtländer, head of the Real Estate Economics competence field at the IW Köln, in response to the results of the survey of about 120 industry players. The critical actors, according to Mr. Voigtländer, are stable economic development in Germany, a further increase in employment, population growth and historically low interest rates.

This quarter, the additional question asked with every quarterly index survey was: Which year will interest rates rise by more than one percent? Only about 8 percent of respondents said they could imagine this happening next year, but about 40 percent said they believed it was possible a year later. However, real estate companies tend to pay less attention to the key interest rate and more to bond yields. The yield on the 10-year German federal bond has emerged as a benchmark. But it has been rising again for some time.

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