The International Monetary Fund: View of the German Housing Market

Germany : 2018 Article IV Consultation – Press Release; Staff Report and Statement by the Executive Director for Germany

In summary the IMF concluded that Germany needs to keep an eye on its property market.  House prices are most overvalued in Munich, Hamburg, Hannover, and Frankfurt, and are estimated to be more than 20 percent above their fundament level on average in major German cities.

A housing valuation model using Germany’s ten largest cities and twelve European peers shows that since 2010, house prices in Munich, Hamburg, Frankfurt and Hannover have increased by 25 to 50 percent above the levels suggested by economic fundamentals. The average overvaluation gap in the 7 biggest cities was 21 percent in 2017.

Annex IX. Is There a Housing Price Bubble in Germany’s Main Cities? 

IMF Country Report Germany, Annex IX 

As most studies are based on country wide price levels a view at city-level is important as they expose a risk level that does not shown at the housing market aggregate level.

     Kajuth, Florian, Thomas A. Knetsch and Nicolas Pinkwart (2016).
     Assessing House Prices in Germany:
     Evidence from an Estimated Stock-flow Model
     using Regional Data.
     Journal of European Real Estate Research Vol. 9(3), 286–307.

IMF Country Report Germany, Annex IX 

The IMF concludes that there is no cause for an alarm yet because there is no lending boom to accompany the price boom.

The economy surprised on the upside in 2017.

The findings of the IMF Report on the general state of the German economy is headed:  IMPRESSIVE RECENT ECONOMIC PERFORMANCE. Real GDP growth picked up sharply, reaching 2.5 percent, as exports rebounded and triggered a much-awaited pickup in investment. Strong private consumption, supported by a robust labor market, was offset by a slowdown in public consumption as refugee-related expenditures stabilized. Although both exports and imports grew strongly, the contribution of net exports turned positive again. The labor market continued to tighten: even though employment grew more slowly than in previous years, reflecting diminished migrant inflows, job creation was strong enough to bring the unemployment rate to a new post-reunification low of 3.6 percent.1 In the first quarter of 2018, growth slowed to 0.3 percent (qoq), reflecting a normal correction following unusually strong growth in late 2017 and temporary factors (strikes, a particularly nasty flu outbreak, and early Easter holidays), but the labor market continued to perform strongly.

Commentary:

The Germany : 2018 Article IV Consultation – Press Release; Staff Report and Statement by the Executive Director for Germany by the IMF shows Germany as a stable investment environment in the Housing Market.

The International Monetary Fund: View of the German Housing Market

City Ranking in Germany for 2017 With Some Surprize Stars in The East

After 2015 the HWWI (Hamburgische Weltwirtschafts Institut) and Private Bank Berenberg have published their City Ranking 2017.

It looks at the 30 biggest German cities using a selection of indicators to determine the dynamics and direction of their development. There are quantitative indicators like demographics and an approach to qualitative indicators like the share of "high skills" jobs in the total number of jobs.

I don't want to make this too dry to read but there are some questions regarding the value of the findings: The indicators are ranked by the diversion from the statistical average for each indicator and then compiled into a summary indicator providing the overall ranking. So 100 new jobs in a city of 500,000 has the same impact as 500 new jobs in a city of 3.5 million.

It still provides an interesting insight into the general direction of the development of cities as well as their surroundings as cities have a growing importance for the development of their region.

So here is the ranking for 2017 in comparison to 2015:

The most remarkable result has to be Dresden, the capital of Saxony going up by 6 ranks and Leipzig in the same state moving up to No.2, both Ex-East-Germany.

Both cities have been the darlings of Anglo investors about 10 years ago driving up prices for investment properties.Subsequently many have abandoned the locations due to high vacancy rates which are now disappearing because of a turn-around in the job market in the region.

The full report is available here: City Ranking 2017

City Ranking in Germany for 2017 With Some Surprize Stars in The East

Germany City Ranking 2015: Munich 1, Berlin 2, Leipzig 3 and Frankfurt 4

The HWWI/Berenberg City Ranking 2015 is out. Some major shifts have occurred. For the first time Munich beat always first Frankfurt for No.1. Seven years ago when the first study was published Berlin was at No. 24 it has now reach No.2. No.3 is still not Frankfurt, it is Leipzig which has constantly made its way up the ladder from No.12 last year. Only then ranking at 4 is Frankfurt.

The ranking is determined by economic strength, demographic and other factors. One of the focus points for future developments is the positioning towards highly qualified workforce.

For the other positions of the 30 largest German cities please refer to the graph below and the full report in German at https://www.berenberg.de/fileadmin/user_upload/berenberg2013/Publikationen/HWWI_Staedteranking/2015-10-05_Staedteranking_ANSICHT_FINAL.PDF

HWWI-Berenberg City Ranking 2015 Summary Index
Source: https://www.berenberg.de/fileadmin/user_upload/berenberg2013/Publikationen/HWWI_Staedteranking/2015-10-05_Staedteranking_ANSICHT_FINAL.PDF

Germany City Ranking 2015: Munich 1, Berlin 2, Leipzig 3 and Frankfurt 4

Germany House Prices 2013 in International and Historical Perspective

The economic research institution of Deutsche Bank DB Research has published their results on current property prices in Germany. Here is the translated content:

Germany house prices in international and historical perspective. 

With the rise of the German house prices concerns have increased that a housing boom has begun, which could end up with noticeable negative impact on the German economy. Our analysis of house price cycles in OECD countries shows that the current price increase in Germany, compared with past climbs, are moderate. Compared with other OECD countries, Germany shows even well below-average prices. We expect that the increase in real estate prices will continue in Germany, but the formation of a bubble is unlikely and the price increases are the normalization of the total housing market.

The development in different areas are obviously different. Munich and Hamburg are closer to a possible "bubble" than e.g. Berlin which is still highly undervalued compared to other European capitals like Warsaw and Budapest, not to mention Paris or London.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities. We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service) Please use this link to the contact facilities provided there to place any requests .
Uwe Falkenberg 

Germany House Prices 2013 in International and Historical Perspective

Sharp Rise in German Business Climate Index

The Ifo Business Climate Index for German industry and trade rose significantly by over three points in February. This represents its greatest increase since July 2010. Satisfaction with the current business situation continued to grow. Survey participants also expressed greater optimism about their future business perspectives. The German economy is regaining momentum.

In manufacturing the business climate indicator rose sharply. This was specifically due to a considerably more optimistic business outlook. Manufacturers also expressed greater satisfaction with their current business situation. Export expectations increased and are now above their long-term average once again.
In wholesaling the business climate also improved clearly after deteriorating last month. Wholesalers are more satisfied with their current business situation and less pessimistic about future business developments. In retailing, on the other hand, the business climate remained unchanged. Assessments of the current business situation were more positive than last month, but retailers were slightly more sceptical about their future business developments.
In construction the business climate index continued to rise sharply, primarily due to a far more optimistic business outlook. The business outlook reached its highest level since German reunification. Satisfaction with the current business situation also continued to grow.
Hans-Werner Sinn
President of the Ifo Institute

Press Release with details click here.

"The fact that the German economy suffered a setback towards the end of 2012. As the Federal Statistical Office (Destatis) already reported in its first release of 14 February 2013, the gross domestic product (GDP) decreased by 0.6% - upon price, seasonal and calendar adjustment - in the fourth quarter of 2012 compared with the previous quarter. The result for the entire year of 2012 remained unchanged at +0.7% (calendar-adjusted: +0.9%)." (Source: Destatis Press release)

Despite this setback all indicators point to a strong recovery of the German Economy as stated by the German Chamber of Commerce and other sources. The property market has seen price increases on all fronts including rent.

For more information keep visiting this blog or sign up for updates. For information on the German Property Market visit www.berlin-portfolio.com.

Sharp Rise in German Business Climate Index

Ifo Business Climate Continues to Deteriorate for the sixth consecutive month

The Ifo Business Climate Index for German industry and trade fell in October for the sixth time in succession. Companies again expressed growing dissatisfaction with their current business situation. The business outlook nevertheless remained unchanged at last month’s low level. The clouds over the German economy are darkening.

In manufacturing last month’s deterioration in the business climate continued in October. Assessments of the current business situation were significantly poorer and now approximately correspond to the long-term average value. Business expectations recovered slightly for the first time in six months and are less pessimistic. According to manufacturers’ reports capacity utilization rates were considerably lower than in the previous quarter. This marks the third drop in succession.
After staging a recovery last month, the business climate index in both retailing and wholesaling dropped this month. The retailers surveyed were much more satisfied with their current business situation, but expressed far greater pessimism about their six-month business outlook. Wholesalers reported slightly improved expectations, but their assessments of the current business situation cooled down significantly.
In construction the business climate indicator fell further. Although the construction companies surveyed expressed less pessimism about their six-month business outlook, they were far less satisfied with their current business situation.
Hans-Werner Sinn
President of the Ifo Institute

Expo Real 2012, the international real estate conference at the beginning of October in Munich has shown that the demand for property investment opportunities in Germany however is unwavering. The yields are under pressure due to the international influx of investors. Especially properties in Berlin are in high demand because of the relative undervaluation compared to other European capitals and the recent rent increases.

Uwe Falkenberg, owner of
Falkenberg Solutions
Real Estate Consultants

Ifo Business Climate Continues to Deteriorate for the sixth consecutive month

Germany September 2012 Ifo Business Climate Index Continues to Fall

The Ifo Business Climate Index for German industry and trade continued to fall in September, marking its fifth successive decline. The companies surveyed are again less satisfied with their current business situation. They also expressed greater pessimism about the future. The curbing forces on the German economy continue to prevail.

After recovering briefly last month, the business climate in manufacturing continued to cool significantly in September. Although survey participants were more cautious in their assessment of the current business situation, it remained clearly above the long-term average value. Expectations concerning the six-month business outlook remained clearly negative and dropped for the fifth month in succession. In terms of the outlook for exports, last month’s slightly negative trend continued.

The business climate recovered at both levels of trade. Companies in retailing reported an improved
business situation, while their expectations were only marginally more pessimistic. The same, but even more pronounced trends were seen in wholesaling. The wholesalers surveyed are far more satisfied with their current business situation than last month, but the six-month business outlook continued to cloud over.

In construction the business climate indicator fell again. Assessments of the current business situation
are less positive than last month. Moreover, the construction companies surveyed are more pessimistic about their six-month business outlook.

Hans-Werner Sinn
President of the Ifo Institute

Apartment Block in Berlin

The demand for property investment opportunities in Germany however is unwavering. The yields are under pressure due to the international influx of investors. Especially properties in Berlin are in high demand because of the relative undervaluation compared to other European capitals and the recent rent increases.



Uwe Falkenberg, owner of
Falkenberg Solutions
Real Estate Consultants

Germany September 2012 Ifo Business Climate Index Continues to Fall

Ifo Business Climate Index Falls Sharply in May 2012

Results of the May 2012 Ifo Business Survey

The Ifo Business Climate Index for industry and trade in Germany fell significantly in May. Assessments of the current business situation deteriorated clearly. The business outlook nevertheless remains above the long-term average. Companies also expressed greater pessimism about their business outlook. The recent surge in uncertainty in the Eurozone is impacting the German economy.
The business climate index in manufacturing dropped sharply. This is primarily due to much poorer assessments of the current business situation. As far as the six-month business outlook is concerned, positive and negative expectations roughly balance each other out. The majority of manufacturers reported defensive recruitment plans for the first time in months. However, they expect further stimulus from exports.

The business climate clouded over significantly at both levels of trade. Assessments of the current business situation slumped in retailing and the majority of expectations are pessimistic. In wholesaling the downturn was relatively small. The wholesalers surveyed saw deterioration in their current business situation and are less optimistic about their six-month business outlook.
The business climate indicator also dropped in construction. While the current business situation showed a slight improvement, the constructors surveyed were less optimistic about future business developments.
Hans-Werner Sinn
President of the Ifo Institute

For detailed results click here.

For support in the identification of the right real estate investment targets please visit our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg

Ifo Business Climate Index Falls Sharply in May 2012