Country Report Germany Q1-2021
“Residential investments recorded positive impetus.”

Dear readers,

“In the first quarter of 2021, the coronavirus-related restrictions to economic and social activity continued to have a controlling influence on the German real estate market. There was a further downturn in the hotel and shopping real estate market due to the lockdown, which mainly affected the tourism and retail industries. Only a very small number of new financing agreements were concluded in this sector. There is still no consensus on the direction that the office market will take moving forward. The logistics real estate market once again delivered robust figures. Residential investments also recorded positive impetus, particularly owing to the decision by the German Federal Constitutional Court to overturn the rent cap, which should lead to higher rents on residential properties. The project development market remains tense, with ongoing projects being affected by the first wave of cost increases. Construction companies’ capacities are limited and it is becoming more expensive to purchase raw materials. Another factor is urban and city centre planning in the post-coronavirus era. Creative and economical design concepts are in demand, with rental income under pressure in the medium term. The sector remains in flux.”

Alois Algermissen

Contact

Mr Alois Algermissen
Head of Hannover Office

Phone: +49 511 3045-591
E-mail: Alois.Algermissen@Deutsche-Hypo.de

REECOX Germany sets new all-time high

The German real estate sector made a strong start to 2021, with growth of 2.1 % and 6.3 % in February and March respectively following a 2.5 % decline in January. The index closed the first quarter at 328.9 points, which equates to quarter-on-quarter growth of 5.8 %. Not only did the peak surpass the high from the final quarter of 2020, it also marks an all-time high for REECOX (since January 1991).

DAX and DIMAX moving in opposite directions

The development of the input variables was partly contradictory. Germany’s benchmark index, the DAX, continued its positive trend from the end of 2020 and stands at just under 15,000 points at the end of the quarter, an increase of 9.4 % compared to the previous quarter. However, the generally positive sentiment on stock markets was not reflected by developments in the real estate share segment as measured by the German real estate share index DIMAX. After rising to a record high at the end of the quarter in 2020, it fell by 4.4 % to 955.4 points. By contrast, the business climate as measured by the European Sentiment Indicator (ESI) was able to even out its losses from the end of 2020. At the end of March the business climate indicator stood at 103.7 points, which represents a double-digit increase of 10.0 % compared to the previous quarter.

Synopsis of Input Variables and Real Estate Economic Situations Q1-2021

Country

Stock Index

Real Estate Economy Index

Economic Indicator

Base Interest Rate

Interest Rate 10-Year Government Bonds

Q4-2001/2102/21Q1-21Delta (%)
Q4-20 / Q1-21
DE
upup
do
upup
eq
up
311.0
303.1
309.4
328.9
5.8
GB
up
up
upup
eq
upup
185.3
184.0
188.8
203.0
9.6
PL
do
up
upup
eq
upup
172.7
174.9
178.4
181.7
5.2
NL
upup
up
upup
eq
up
178.5
181.4
181.2
188.2
5.4
FR
upup
eq
upup
eq
upup
219.8
219.0
223.0
229.0
4.2
ES
up
up
upup
eq
upup
169.6
171.4
170.6
175.1
3.2