King Sturge Real Estate Economy Index: Clear Surge in Sentiment

The monthly King Sturge Real Estate Economy index shows a continuation of its upward trend in September. The positive development of the Real Estate Economy index is buoyed both by the poll-based Real Estate Climate and by the Real Estate Economic Situation which is based on hard economic data. The sentiment indicator improved from its previous value of 64.6 to now 75.6 points, thus scoring the fastest growth hike in its history. For one thing, the Investment Climate – the indicator for investment and purchase decisions – grew by 18.1 percent to 84.4 points (compared to 71.4 the previous month). In addition, the September survey registered a first-time climb of the income situation, up to 67.0 points (previous month: 58.0). At the same time, the Real Estate Economic Situation continued its surge as it rose by 7.5 percent up to 142.6 index points (previous month: 132.7) and consolidated its upward tendency. Once a month, the independent consulting agency BulwienGesa AG polls about 1,000 market players for the King Sturge Real Estate Economy index.

“The confidence crisis ushered in by the collapse of Lehman Brothers has thus been balanced just about exactly one year on. The German real estate industry is regaining its confidence in the markets. The worst fears of the past months have evidently failed to materialise. More than that, the economic picture is brightening. “Even if the crisis is far from over, the long-term prospects for an economic boom are in sight,“ said Sascha Hettrich, Managing Partner of King Sturge Deutschland.

The September survey recorded the first true surge for the individual segment indicators. Compared to past months, which tended to return minor changes in single-digit percentages, the office segment scored a major gain in September. This segment indicator improved by nearly 29 percent, and currently weighs in at 56.8 points. Retail-related real estate scored 74.1 index points, gaining another 14.1 percent. Residential real estate, traditionally considered a safe haven, improved its anyway good rating by adding 7.5 percent and climbing to 142.6 points. This means that more than two out of three experts have diagnosed a sound climate for residential real estate.

While the climate ratings mirror the sentiment among German real estate experts, the Real Estate Economic Situation assesses the macro-economic facts on the basis of statistical metrics. In September, the Real Estate Economic Situation rose again, and consolidated its upward tendency. The index picked up 7.5 percent and rose to its present level of 142.6 points. Aside from a minor dip in July, the Real Estate Economic Situation continued its steady recovery since April 2009. It now matches the level of fall 2003. Obviously, it still has a long way to go to regain the peak registered during the boom phase between 2006 and 2007. However, the economic trough, which was deeper than the one of 2002/2003, has been overcome for the time being.

“The outcome of Germany’s federal elections, having returned a clear majority, adds to the stabilising momentum. Only an administration with a solid majority will be able to initiate the needed reforms and to make the kind of decisions that will boost the financial and real estate sectors. Encouraging the cautious optimism and the incipient economic recovery with the right kind of policy measures is now of the essence,” Hettrich added.