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.