German Investment Market: Positive signals from consumer climate July 2009

Consumer climate – upwards trend continues

Findings of the GfK consumer climate study for July 2009

Nuremberg, July 27, 2009 – In Germany, the upwards trend in the consumer climate continues on through the summer. Both economic and income expectations have increased and there has been a considerable rise in the propensity to buy. The overall indicator is forecasting a value of 3.5 points for August 2009, following a revised value of 3.0 points in July, and has therefore improved more strongly than in the previous month. In a longer term comparison however, the consumer climate is still at a very low level.

After some economic institutes signaled an end to the economic downturn, the economic pessimism on the part of consumers also declined. Following a moderate climb in the previous month, July saw a somewhat stronger improvement in the economic outlook. Inflation is disappearing and people have more money in their pockets. Consumers are rewarding this situation with another rise in income expectations. Furthermore, stable and indeed falling prices led to the propensity to buy recording the biggest gain of all the indicators in July. Alongside favorable prices, the fact that the labor market has not slumped yet plays an important role here. However, the acid test for the consumer climate still lies ahead should there be a significant rise in unemployment figures again in late autumn.

Economic expectations: improvement continues

Economic pessimism declined again in July this year. The current upswing of 8.6 points is the fourth rise in a row. The indicator now stands at -14 points and is only 6 points below the corresponding figure in the previous year. Economic expectations have therefore moved significantly away from their recession low at the start of the year when the indicator was down at almost -33 points.

Consumers obviously assume that the steep downturn in the economy has come to an end, even if they do not consider the recession to be over and they therefore share the opinion of several economic experts who have arrived at a similar assessment. In its recently published monthly report, Deutsche Bundesbank for example believes that the free fall in the German economy is over for the time being. The ifo Business Climate Index also rose the fourth time in a row in July, supporting this theory.

Reports from industry also give cause for cautious optimism. Most recently, the Federation of German Industries (BDI) reported that there were signs of an end to the downturn. Moreover, the major shock in the labor market has so far not materialized. Companies are presently still trying to absorb losses by using short-time working. However, to avoid large scale redundancies in the future, the economic situation would have to stabilize on a sustained basis.

Income expectations: back in positive territory

After a significant rise of 6 points in the previous month, income expectations gained a further 5 points in July. Currently the indicator stands at 1.8 points, in positive territory again for the first time since April 2008.

In addition to the absence of inflation, the pension increases as of 1 July of 2.4% on average should have helped improve sentiment regarding incomes. Since the middle of the year, measures under economic package II, such as lower health insurance premiums and income tax relief, have also eased the situation. In conjunction with stable prices, these measures continue to support income expectations.

Propensity to buy: significant gains

The propensity to buy improved significantly in July this year from its already high level. With a rise of 10.6 points, the upswing even hit double digits. The indicator currently stands at 25.1 points. Compared to the figure for the previous year, the indicator has improved by a good 51 points. Above all, low prices are currently acting an important driver for the propensity to buy. Experience in the past has repeatedly shown that there is a direct link between consumer price expectations and their willingness to spend money.

Technical consumer goods such as entertainment electronics and household appliances are currently popular with consumers. This is confirmed by the corresponding GfK retail surveys, which show growth for technical consumer goods in the first five months of this year. According to the GfK Retail and Technology Non-Food Index there were significant rises in terms of sales between January and May 2009 above all in the areas of entertainment electronics (+3.%), information technology (+5.5%) as well as large and small household appliances (+8.6% and +6%). In the car segment, new registrations recorded a double digit increase, although this was primarily due to economic policy in the form of the scrappage allowance.

The propensity to buy is also likely to have been boosted by the fact the current low interest rates and the financial crisis have made saving unpopular at the moment. This is confirmed by the decline in the propensity to save.

Consumer climate: upwards trend continues

The overall indicator is forecasting a value of 3.5 points for August 2009, following a revised value of 3.0 points in July. Again there has been a stronger rise in the consumer climate. Consequently, private consumption currently remains a significant support for the economy. However, the level of the indicator is still comparatively low.

A sustained stabilization in the consumer climate will depend above all on the further development of the labor market. Should there be a considerable rise in the number of unemployed again in late autumn, this would be likely to become an endurance test for consumer sentiment.

The survey

These findings are extracts from the "GfK consumer climate MAXX survey”, which is based on around 2,000 consumer interviews conducted each month on behalf of the EU Commission. The report contains charts, forecasts and a detailed commentary regarding the indicators. In addition, the report includes information on proposed consumer spending in 20 different areas of the consumer goods and services markets. The GfK consumer climate survey has been conducted since 1980.

The next publication date will be on August 27, 2009.

Further information: Rolf Bürkl, Tel. + 49 911 395-3056, rolf.buerkl@gfk.com

The GfK Group

The GfK Group offers the fundamental knowledge that industry, retailers, services companies and the media need to make market decisions. It offers a comprehensive range of information and consultancy services in the three business sectors of Custom Research, Retail and Technology and Media. The no. 4 market research organization worldwide operates in more than 100 countries and employs over 10,000 staff. In 2008, the GfK Group’s sales amounted to EUR 1.2 billion. For further information, visit our website: www.gfk.com.

Responsible under press legislation

GfK SE, Corporate Communications
Marion Eisenblätter
Nordwestring 101
D-90419 Nuremberg
Tel. +49 911 395-2645
Fax +49 911 395-4041
public.relations@gfk.com

The development of the consumer climate is complemented by an optimistic view of the Business Climate (See article on recent development). For background information on the development of the German Property Market and opportunities in the rental market please view www.berlin-portfolio.com.

Uwe Falkenberg

German Investment Market: Positive signals from consumer climate July 2009

German Economy: Business Climate Improved Again

The German Business Climate improved for the fourth consecutive month:

The Ifo Business Climate Index for industry and trade in Germany rose again in July. The firms are no longer quite so dissatisfied with their current business situation as in the previous month. They are again less sceptical regarding business developments in the coming half year. It seems that the economy is gaining traction.

In manufacturing the business climate has improved. The firms report a business situation that is no longer quite so poor. With regard to the business outlook their estimations are yet again less critical. Their scepticism regarding foreign business has also weakened further. The utilisation of available machinery and equipment has, since Spring, not been further reduced, but overall the utilisation rate of technical capacities is clearly below average. The manufacturers have made little change in their personnel plans and intend to reduce staff further.

The business climate in wholesaling has brightened. The survey participants have assessed their current business situation less negatively. Also with regard to the business outlook, their pessimism has abated. Retailers have appraised their current business situation clearly more favourably than in the previous month and have ranked it as nearly satisfactory. Their business expectations for the coming half year, however, are more dampened than they were in June. For this reason, the business climate index in retailing has fallen slightly.

In construction the business climate is somewhat more favourable. The contractors are less dissatisfied with their present business than they were in June. Their caution regarding the six-month business outlook has weakened somewhat.

Hans-Werner Sinn
President of the Ifo Institute for Economic Research at the University of Munich

Detailed material including Graphs and Tables are available on the ifo-website.

The investnent climate for property or real estate investments in Germany is favourabel and the demand not only by opportunists is increasing. For support on property search and investment contact Berlin Portfolio.

German Economy: Business Climate Improved Again

Investment in Germany - Consumer Climate – Consumers are in the mood to buy

Consumer climate – despite the economic crisis,
consumers are in the mood to buy


Findings of the GfK consumer climate study for June 2009


Nuremberg, June 23, 2009 – After several months of stagnation, the mood of consumers in Germany is once again showing a slight upwards trend, with economic and income expectations on the increase and the propensity to buy also improving slightly. The overall indicator is forecasting a value of 2.9 points for July 2009, following a revised value of 2.6 points in June, and is therefore climbing slightly following a period of stability. However, the consumer climate remains at a low level overall.


Following the recent growing number of signs that the economic downturn may be coming to an end, consumer hopes of economic stabilization are intensifying and accordingly, economic expectations are increasing moderately. The fact that the employment market has remained fairly robust is likely to be one reason for this. Reports that the inflation rate stood at 0% in May are having a positive effect on income expectations and the propensity to buy. Although both indicators have recorded increases, income expectations have seen considerably more improvement. The consumer climate is therefore indicating positive development for July. However, the real test is yet to come, given the likelihood of rising unemployment in the months ahead.


Economic expectations: third increase in a row

Economic expectations have increased in June this year, for the third month in a row. The increase of 5.7 points is even more pronounced than in the two preceding months. The indicator currently stands at -22.6 points, which shows that the recovery is continuing into mid-2009 – albeit still at a very low level.
Economic pessimism is declining somewhat and consumers seem to be expecting that the steep economic decline can gradually be halted. Certainly, this increase in the indicator has been supported by the fact that the expected slump on the unemployment market has so far not materialized, and has been deferred by improved short-time working regulations. However, the indicator is still far too low to warrant talk of an incipient recovery from the perspective of consumers.

The increased optimism of financial analysts shows that German citizens are by no means alone in their diminishing pessimism. The medium-term economic expectations of the Zentrum für Europäische Wirtschaftsforschung (Centre for European Economic Research, ZEW) have improved noticeably in June, and the ifo business climate has also brightened slightly for the third month in a row. Both institutes therefore perceive a stabilization of the German economy as being possible.


Income expectations: highest value since April 2008

Following slight losses in the previous month, income expectations have once again recorded increases in June this year. The indicator has climbed 6 points to stand at -3.3, which is the highest value since April last year. The decrease in inflation and the prospects for pensioners of a significant boost to their received pension payments as of July 1, 2009 are certainly the important factors buoying up income expectations at present. These factors are counteracting creeping redundancy fears and have held at bay the negative effects on the indicator up to now. However, it is to be expected that the forecasted deterioration on the jobs market will increase these unemployment fears, and will place a great amount of strain on income expectations.


Propensity to buy: slight increases

The propensity to buy not only retained its current good level in June this year, but even improved slightly. Following an increase of 2 points this month, the indicator now stands at 14.5 points, which means that there has even been a considerable improvement of 38 points in comparison with the prior year. In particular, the large decrease in inflation is currently stimulating the propensity to consume. Falling prices, for example as a result of the scrappage bonus, act as incentives to buy. Other industries are also implementing this type of price reduction, in order to encourage consumers to make further purchases.

The fact that consumers have not yet completely regained their trust in the financial markets is also having a positive effect on the propensity to buy. Rather than saving, consumers are currently tending to invest their disposable income in consumer goods.


Consumer climate: improvement, but at a low level

The overall indicator is forecasting a value of 2.9 points for July 2009, following a revised value of 2.6 points in June. The consumer climate is therefore improving slightly, although the level of the indicator remains comparatively low.

It is unclear whether this marks the beginning of a sustained recovery in consumer mood. The development of the employment market over the coming weeks will be decisive.

Press Release by:
GfK SE, Corporate Communications
Marion Eisenblätter
Nordwestring 101
90419 Nuremberg, Germany

For more detailed information about the data and the index please view the information on the website of GfK

For background information on the development of the German Property Market and opportunities in the rental market please view www.berlin-portfolio.com.

Investment in Germany - Consumer Climate – Consumers are in the mood to buy

Ifo Business Climate Germany

Ifo Business Climate Germany
Results of the June 2009 Ifo Business Survey
Ifo Business Climate Brightens Somewhat

The Ifo Business Climate for industry and trade in Germany improved once again in June. The brightening was solely the result of the firms’ expectations – the pessimism of the survey participants with regard to the six-month business outlook has again weakened. Their dissatisfaction with the current business situation is just as strong as it was in May. The survey results confirm that the German economy is gradually stabilising.

In manufacturing the business climate indicator rose. The survey participants have appraised their current business situation somewhat less unfavourably than in the previous month. Nevertheless, the manufacturers are largely dissatisfied with their present situation. However, a further worsening of business in the coming six months is no longer expected quite so frequently as in the previous month. The decline in export business, according to the survey responses, will weaken somewhat. The firms’ employment plans are less negative
than they were in the previous month but are still clearly aimed at personnel reductions.

In wholesaling and in retailing the business climate has further improved. In both distribution sectors the brightening of the business climate is the result of firms’ clearly less negative business expectations. However,
wholesalers and retailers have given more unfavourable assessments of their current business situation than in May.

The business climate in construction remains nearly stable. The current business situation has been given somewhat worse appraisals by the firms. However, with regard to the business outlook they are less reserved than they were last month.

Hans-Werner Sinn
President of the Ifo Institute for Economic Research at the University of Munich

Detailed material including Graphs and Tables are available on the ifo-website.

Ifo Business Climate Germany

Residential Rent Development in Berlin

The Berlin Rent Table 2009 was published this week (see also yesterday's blog entry). The average increase of the net rent was 4 ct per sqm per month annually for the last two years since the last rent table, that is 1.7 % for the 2-year-period. In the same timespan the utility cost and heating (Betriebskosten und Heizkosten) increased on average by 5% to 2.35 Euro per sqm per month. Basically the increase in those ancillary costs is taking away the option for higher rent increases. Here should be an angle for optimising the performance of properties through Property Performance Improvement.

A more detailed analysis of the rent development in different market segments shows an interesting difference in the development of the net rent: The increase in rents for small apartments < 40 sqm over the 2-year-period was 5.3% to 5,41 Euro due to increased demand in that period. These apartments were especially popular with "New-Berliners".
For apartments between 60 to 90 sqm the increase was below average at 0.9 % for two years. This segment is still very low at 4.71 Euro per sqm compared with Hamburg at 6.53 or Munich at 9.90 Euro. Some segments have seen above average modernisation activities and thus above average rent increases. This applies to buildings from 1919 to 1949, 1950-1955 and 1973 to 1983 (the latter for ex West-Berlin). Here the increases were between 3.8 and 3.9 %.

The variation in the different market segments shows that a good asset strategy will yield better returns, even in times of slower rent increases. For support of the development of a successful property or portfolio strategy contact Berlin Portfolio Ltd.

Residential Rent Development in Berlin

Berlin Rent Table 2009 "Mietspiegel"

During the past two years, average rents in Berlin have risen each year by only 4 cents/sqm/month. For an apartment without rent control, the average monthly rent in Berlin is now €4.83/sqm without heating and utilities. Very small apartments of less than 40 sqm had an above-average rent development of 5.3% to €5.41/sqm per month. These conclusions were drawn from the new, qualified rent index for 2009 which has been accepted by all six lessor and tenant associations for the first time since the year 2000. Apartments in houses built between 1973 and 1983 in western districts and new buildings constructed since 1991 are also above the average. Rents in the latter buildings rose by 1.5%, from an average of €6.58 to €6.68 per month. For the first time, the rent index also takes the energy efficiency of buildings into account.

Here is a link to the download from the official Berlin Senate website.

For Property Performance Improvement follow this link.

Berlin Rent Table 2009 "Mietspiegel"

German Real Estate Index Points Up!

The mood in Germany's real estate industry, according to the King Sturge Real Estate Activity Index, is again brightening. After declining during the previous month, the survey-based value for the real estate climate rose in May by 8.2% to 55.6 points. For the first time this year, both its sub-indices improved: the profit climate rose by 9.2% to 54.8 points (previous month: 50.2) and the investment climate rose for the fifth consecutive time to 56.4 points (previous month: 52.6). The upswing in mood affects all real estate sectors. The most significant benefit was found in the office market where the climate index improved 10.2% to reach 33.3 points, still a level that is assessed as critically low. A cause for cautious optimism may be the second slight increase in the economic index based on macroeconomic data: the value in May, at 127.3 points, was 4.4% above the April level of 121.9 points.

German Real Estate Index Points Up!