German real estate professionals grew markedly gloomier in the second half of 2008 as the economy began to feel the full force of the international financial crisis.
German real estate professionals grew markedly gloomier in the second half of 2008 as the economy began to feel the full force of the international financial crisis.
King Sturge announced on Tuesday that its German Real Estate Climate index lost 50% of its value in the last six months. The Real Estate Economy index, which is based on hard economic data on the German economy, also hit a new negative record as it dropped from 136.7 to 126.9 index points in December.
The property adviser said that the unprecedented low of the poll-based Real Estate Climate survey was mainly due to the drying up of investment deals. 'The transactions volume is down to a minimum, with the real estate economy regressing to the level of 2002/2003,' said Sascha Hettrich, managing partner of King Sturge Deutschland. 'It makes a person wonder how far we have to go yet before hitting rock bottom.'
King Sturge said the pace of collapse in confidence was striking. The mood among real estate players was still positive in June 2008 - showing a Real Estate Climate of about 101 index points - but the expectations dropped steadily during the second half of 2008, and hit 40.7 points in December 2008. Compared to the previous month, this translates into a 16% decline.
'The coming year is starting off on an ominous note: Every climate index value has been pointing downward for months,' Hettrich said. 'The immediate effect of the crisis will be price adjustments and an in-depth restructuring of the market.'
But he said the situation also offered an opening to equity-rich investors. 'High net worth investors have ample opportunity to make interesting investments. Here, perfect timing is of the essence,' Hettrich added.
