News/Real Estate Finance

REECOX Germany undergoes significant price drop

Deutsche Hypo REECOX down 8.7 % to 289.8 points

The German real estate index has recorded a negative performance for the fourth quarter in a row. Falling by 8.7 % to 289.8 points, this was the steepest decline of any European country.

Frank Schrader, Managing Director Deutsche Hypo – NORD/LB Real Estate Finance stated: “The many challenges that exist around the world are reflected in the performance of the Euro Score. Whereas a recovery looking likely last year, a number of exceptional events are creating significant amounts of uncertainty. The parallel occurrence of these rare events has been unprecedented. The real estate industry has been adversely affected by these factors.”

Once every quarter, the REECOX provides an overview of real estate market activity in Germany, France, the UK, Poland, Spain and the Netherlands. The index for each of the six countries is calculated using five input variables. In Germany, those variables are the DAX, the DIMAX, the European Commission’s Economic Sentiment Indicator (ESI) for Germany, the basic rate of interest pursuant to Section 247 of the German Civil Code (BGB) and the interest rate for ten-year German government bonds. Although all market variables contributed to the current trend in the German real estate index, they varied considerably in terms of their impact. The German blue-chip index DAX suffered a sharp decline of  11.3 % to stand at roughly 12,784 points. The German real estate share index DIMAX recorded even greater losses: a drastic quarter-on-quarter decline of 26.0 % to roughly  596.0 points brought it down to a level not seen since April 2016. Business sentiment dropped only slightly by 1.7 % in the second quarter.

José Luis Calderón Martínez, Head of Central Acquisition/Head of Berlin Office/Head of Hanover Office, says: “In light of the challenging conditions – war in Ukraine, inflation, fears of recession, rising interest rates, high construction costs and supply chain issues – the prevailing mood on the real estate markets can still be described as ‘surreally’ good. We see no signs of a downturn at the moment. The logistics sector is currently benefiting most.”