The fear-mongering in public discussions does not make it easy to keep a cool head. After many overheated real estate years, now comes the "back to normal".

No Panic!

06.07.2022 Autor/en: Ralf-Peter Koschny

The shocks in the global economy are having an impact on the real estate market. Inflation rates have been rising since the end of 2021 and it has become obvious that the lax monetary policy will have to come to an end quickly. However, we should beware of hastily constructed crash scenarios.

In addition to the two economic turning points of inflation and interest rates - as is well known, low interest rates fuelled the real estate boom in Germany for a long time - the Ukraine war is now manifesting a military and geopolitical turning point. At the same time, this third caesura is changing and intensifying the effects of the other two caesuras and thus the economic framework conditions, also for the domestic real estate market. The well-known challenges such as demographic change, climate change, shortage of skilled workers and regional disparities have of course not been eliminated by the acute crisis.

Market participants are unsettled: How will inflation develop? Is the yield curve flattening? How will the availability of materials and labour develop? The uncertainty is also reflected in the current real estate climate. We compile this sentiment barometer monthly for Deutsche Hypo. After the Real Estate Climate had already fallen below the 100-point mark in May, the mood of the approximately 1,200 real estate experts surveyed fell drastically in June: the Real Estate Climate plummeted by 17.5 % to 80.8 points and thus experienced the most significant decline since the beginning of the Corona crisis. The sharp decline in the Investment Climate - which fell by more than 21 % - contributed to this in particular.

Another important seismograph for the perceived business situation is the BF.Quarterly Barometer, which surveys the mood of selected experts on the lender side. Already in 2019, the mood for commercial financing was tighter than in previous years, then the pandemic turned the mood significantly negative. Two years after the sharp decline in the Barometer score as a result of the Corona pandemic, the current second quarter of 2022 sees the score drop significantly again, this time to -12.01 points (for comparison, in Q1/2015 the Barometer score was at its previous high of 8.11 points). The main reasons for the sharp decline are high inflation and rising interest rates in the long term.

The German project development market is also faltering after years of growth. Rising interest rates and sharply rising construction costs are making business much more difficult for developers. Virtually all types of use (office, retail, residential, other) are suffering from uneconomic market conditions such as limited returns on rents and prices and the continuing sharp rise in construction costs.


The real estate market, which has been driven by financial markets for the past decade, is changing. Business models need to be reviewed and adapted to the new circumstances; close scrutiny and selection in portfolios is also essential; higher interest rates will have a lasting impact on the investment market. Project developments will continue to decline. The maintenance of portfolios will move into the foreground, the transaction market will become more restrained. The opportunities lie in the right selection of projects, both in the portfolio and in project development.

So there will be no paradigm shift. The - often overlooked - demographic change is to be seen as a major force here.

  • Medium and affordable market segments clearly gaining in importance
  • Demographic development supports properties with senior demand
  • The trend towards suburbanisation continues - re-urbanisation was yesterday's trend
  • Logistics prices and local supply centres are becoming more affordable again
  • Shopping centres are emerging from the valley of tears
  • Commercial buildings reinvent themselves

Contact: Ralf-Peter Koschny, Spokesman of the Executive Board,



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