1. Research

ECB helps industry and boosts property prices

27. Juli 2016
There is a high level of excess demand in the housing market and it has grown in recent years. Demand for credit is also growing at a correspondingly rapid pace. The supply of credit could be boosted by further monetary stimulus. In the medium term, more buoyant lending is likely to increase interest rate risk. However, if lending growth remains low, there will be increased risk of overvaluations and a house price bubble. This is particularly true when little new housing is financed and lending is largely for existing property. Given the high level of excess demand in the housing market and the fact that office buildings are being converted to residential buildings, office space is also likely to be in short supply in the coming years. As a result, rents in the office market can be expected to rise more strongly, and could – for a time – outstrip the rise in rents in the housing market. Since Chancellor Merkel assumed office in 2005 her term has been dominated by crisis management, which often required leadership and moderation of differing interests in Europe. Managing the UK’s departure from the EU will have top priority for the time being. Nonetheless, Merkel is likely to focus her attention on domestic topics as much as on European ones in the upcoming months given the looming federal elections in autumn 2017. Also in this issue: Fewer insolvencies in German industry. [mehr]

Weitere Dokumente von Jochen Möbert

90 (61-72)
6. Oktober 2017
61
The view from Berlin: Jamaica unlikely to trigger fundamental policy changes. The total additional fiscal impulse provided by a Jamaica coalition could in our view amount to between EUR 15 bn and EUR 20 bn in 2018. This would be only marginally more than the EUR 15 bn tax cuts "promised" by the outgoing Minister of Finance, which we had already taken into account in our 1.8% GDP forecast for 2018. Proposals in the FDP's election platform to scale back the ESM and to install an orderly EMU exit procedure have raised concerns among some EU politicians. We doubt that these two proposals will make it into the coalition treaty. Despite the FDP's insistence on more market- and rule-based procedure within EMU, it is very unlikely that Germany would not provide the necessary support if another EMU country slipped into acute crisis. (Also included in this issue: Public finances after the election, World trade) [mehr]
6. September 2017
63
Germany booming but wage-inflation still missing. We have lifted our 2017 GDP forecast from 1.6% to 1.9%. 2018 we revised only marginally up (from 1.7% to 1.8%) as we expect euro-induced export headwinds to counteract domestic strength. In H1 the economy expanded with an annualized rate of 2.6%. With EUR appreciation feeding through only gradually and capex picking up, GDP growth should slow only marginally in H2. 2018 kicks off with wage negotiation in key sectors. The strong labour market suggests wage settlements north of 3%, but the (classic) Phillips curve nexus is only weak and other factors could weigh. (Also included in this issue: German wage round in 2018, industry output forecast, The view from Berlin) [mehr]
31. August 2017
64
During the past four years, prices for owner-occupied homes have risen by c. 30% and rents by 15% across Germany. So far, the government’s housing policy has hampered rather than promoted residential construction. A few weeks ahead of the German parliamentary elections we take a look at the housing policies spelled out in the election programmes of the six largest parties. There are several ideas to make it easier for people, in particular families with children, to buy homes. However, additional policy-induced stimulus for demand might push prices upwards, particularly since supply is relatively inelastic. In that case, any electoral gifts would not benefit the families, but only the property sellers. [mehr]
8. August 2017
65
Forecast for German Q2 GDP lifted to 0.8%. Strong private consumption boosts retail sales. Germany’s fiscal outlook: Goldilocks will not last forever. The view from Berlin: Asylum policy & refugee issues back on stage. [mehr]
7. Juli 2017
66
The German economy is likely to have maintained its rapid growth rate in the second quarter. Consumer spending, in particular, has been stronger than expected thanks to the recent fall in oil prices and the continuing significant rise in employment levels. We have revised our GDP forecast for the whole year upwards to 1.6% (1.3%) which is equivalent to a calendar-adjusted rate of 2%. Considerable house price increases in 2017 and 2018 – and more significant wealth effects? The view from Berlin. Summertime and election campaigns. [mehr]
6. Juni 2017
67
After Q1’s sturdy 0.6% qoq GDP growth, soft indicators do not signal any moderation of the growth momentum. Employment in 2017 so far, has been expanding at similar clip as in 2016, making our 1% consumption forecast for 2017 quite conservative. Exports have rebounded in the winter half – in line with global trade. The growth momentum of global trade seems to have peaked; therefore, we remain cautious, predicting 3.6% German export growth in 2017 after 2.7% last year. In combination with lingering geo-political uncertainty this will weigh on investment spending, where a utilization rate of 2pp above its long-term average suggests a still limited necessity to invest. Following Q1 GDP growth of 0.6% we have revised our 2017 GDP forecast to 1.3% (1.1%). Latest confidence surveys, however, hint at further upside potential and increasing risks of over-heating for 2018. Political observers in Germany have recently been focusing on the SPD’s ups and downs in the polls and the CDU’s reverse showing while smaller parties are fighting for public attention. From the present point of view (polls) a Jamaica coalition is the sole arithmetically feasible alternative to a renewed grand coalition after the September election. (Further topics: German industrial output – forecast for 2017; Corporate funding in Q1 – lending) [mehr]
26. Mai 2017
Region:
68
The massive overvaluations on the euro-area market for residential real estate (as measured by the price-income ratios for 2007 and 2008) are a thing of the past. Currently, house prices are excessive only in several smaller countries. However, this situation is likely to change towards the end of the decade if the dynamic uptrend in German house prices continues as expected. [mehr]
5. Mai 2017
69
Growth in global trade almost stagnated at just 1.3% in 2016, and in some months was even negative. During winter, global trade picked up again, rising by around 3% compared to the same period a year earlier. Given the positive sentiment prevailing across the globe, this rebound could well continue. However, this trend is not yet being fully reflected in other hard economic indicators, usually highly correlated with global trade, and sentiment may therefore overstate the actual trend a little. Still, our simple model of world trade, which suggests moderate growth of just over 2% in 2017 and around 3% in 2018 might represent the lower limit of the forecast range. However, compared to previous cycles the upturn could remain weak, not least because of the global trade restrictions that have been progressively ratcheted up since 2008. [mehr]
6. April 2017
70
In international debate public investment is often regarded as a useful lever for promoting higher domestic demand. Despite international criticism and political declarations of intent, public investment in Germany has only increased moderately over the past two years and has remained average, at best, on an international scale. In the coming years, however, public investment is expected to grow significantly. The current investment plans for the federal budget are 40% higher than those adopted in 2013. Public contracts for the construction industry in 2016 were between 15 and 27% above the average of the previous 10 years. The excellent state of the public finances at the various government levels also supports the prospect of increasing investment growth. However, severe capacity shortages in the construction industry are likely to mean that the high demand for investment will not quickly lead to an increase in construction activity. (Further articles: German housing market, Corporate bond boom in Germany, Result of the Saarland election) [mehr]
22. Februar 2017
Region:
71
The headline inflation rates, which have increased substantially in recent months, have rekindled the debate surrounding the ECB's bond-buying programme. German producer prices have also risen sharply in recent times. In December 2016, the prices of metal (up by 5% on December 2015) and energy (up by 10%) increased particularly sharply. Nevertheless, the remaining inputs (weighting: 83.6%) continued to show no inflationary pressure at all. [mehr]
13. Januar 2017
72
Munich remains the most dynamic German city when it comes to property, with its fast-rising population and historically low vacancy rate likely to lead to further price increases for many years to come. Further price rises are also expected in Berlin, although the main factors at play here are the very buoyant labour market and the fact that prices and rents are still relatively low for a European capital city. Of the German cities that were analysed for this report, Frankfurt has shown the lowest increase in prices in the current cycle. However, we are now seeing a Brexit effect, which is driving up prices for family homes in particular. Sluggish rent growth and a high level of construction activity are the most striking trends in Hamburg, which could make the city more sensitive to interest rate movements than other urban centres. The situation is similar in Düsseldorf, where the vacancy rate in the current cycle is relatively high for a large German city. For every city analysed here and for the overall German housing market we anticipate further price increases in the coming years. All the macroeconomic conditions that might signal an end to the cycle – such as a turnaround in interest rate policy, a massive expansion of supply and/or a slowdown in migration to Germany – are not yet fulfilled and it is likely to be several years before they materialise. Consequently, we expect rents and property prices in the major German cities and across the country to continue to rise sharply in 2017. [mehr]
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