The quarterly Reecox European economic indicator published by Deutsche Hypo continues to decline: so has the European real estate economy peaked?
The so-called Reecox index for the German real estate economy is currently stable. However, there is negative growth in the real estate sector in all six European countries surveyed by Deutsche Hypo. The most significant downturn in the Reecox in the 3rd quarter of 2019 is in the UK.
Since the start of 2018, Deutsche Hypo and market researchers Bulwiengesa have co-operated to produce the Real Estate Economy Index (Reecox) as a quarterly indicator of the situation in the real estate economy. The index shows the development of the real estate sectors in Germany, the UK, France, Poland, Spain and the Netherlands and is based on a survey of over 1,000 market participants.
The Reecox score for all six countries in the 3rd quarter of 2019 is 229.2 points, which is a fall of 1.5% compared to the previous quarter. The previous all-time high was 250 points at year-end 2017; it has been all downhill since then.
“We have lived through an extraordinary cycle over the last few years, and we know that this must end sometime”, explains Sabine Barthauer, board member of Deutsche Hypo. There is still plenty of optimism in the market and property is still in high demand amongst investors.
German real estate sector is stable at just under 300 points
After a positive start to the year 2019 but also in the wake of a significant downturn at mid-year, the German Reecox is stable in the 3rd quarter, reports Deutsche Hypo: “The index actually fell marginally by just 0.3% to 295.6 points compared to the 2nd quarter, which keeps it below the 300 point mark and there is no further recovery in sight”, says Sabine Barthauer. The index had recently pushed above 300 points with 303.2 in May 2019.
The other European markets have developed in very different ways. The most negative development was in the UK with -4.7%, down to 189.5 points at the end of the 3rd quarter, whilst there was remarkable growth in both France (+1.2% to 234.7 points in September) and the Netherlands (+1.5% to 234.7 points). There was a marginal increase in Spain which grew from 198 points in June to 199 points in September. There was a fall in Poland to its current level of 185 points after a moderate downturn of 1%.
The DIMAX real estate share index is an essential part of the Reecox
The recent negative development of the German DAX index turned a corner with a growth of 0.2% in the 3rd quarter of 2019. The German DIMAX index of stock exchange-listed property companies was an important contributor to the development of the Reecox over the 3rd quarter. The total growth of 5.9% to its current level of 867.6 points did much to hold off the noticeable downturn from the 2nd quarter.
By contrast to the generally positive developments on the stock markets, Deutsche Hypo reports that forecasts relating to the German economy continue to cool down: according to the European Sentiment Indicator (ESI), the overall economic climate fell by 3.1% to its current level of 99.4 points in the 3rd quarter, which is the first time this has dropped below 100 points since July 2013.
