News/Real Estate Finance

REECOX – Germany’s real estate sector remains stable

REECOX Germany finishes the third quarter at 295.6 points

Following a positive start to the year and a significant mid-year decline, the German REECOX demonstrated stable overall development in the third quarter. The index fell by 0.3 % to its current level of 295.6 points, remaining below the 300-point mark. There is currently no sign of a recovery. The other European markets experienced divergent development: the UK saw the greatest degree of negative development, at -4.7 %, while France (+1.2 %) and the Netherlands (+1.5 %) recorded gains. All in all, the Deutsche Hypo Euro Score, which combines the real estate sector values for all six of the European markets we monitor, fell by 1.5 % to 229.2 points.

Sabine Barthauer, Member of the Board of Managing Directors at Deutsche Hypo: “The Euro Score indicates a declining trend for the second quarter in a row. Does this mean that we have now finally passed the peak? That remains to be seen. After all, the REECOX is still at a very high level of 229.2 points.”

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 Union’s Economic Sentiment Indicator 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. The German DIMAX real estate index made a key contribution to the development of the REECOX in the third quarter. A rise of 5.9 % to the current level of 867.6 points partially offset the significant decline seen in the second quarter. On the other hand, business sentiment as measured by the European Sentiment Indicator (ESI) continued its decline, falling by 3.1 % to 99.4 points, marking the first time since July 2013 that business sentiment has fallen below 100 points.

Alois Algermissen, head of the Hanover office, says: “Sentiment on the real estate market remains positive. The ECB has famously announced that it will not raise interest rates in the foreseeable future. Real estate investments are therefore still attractive to investors compared to other asset classes.”