Despite ever escalating fears of Sino-American trade disputes spilling over to Europe, and hints of an end to historically low interest rates, lead macroeconomic indicators in Germany remain robust. GDP growth in the second quarter of 2018 is showing no declining trend and consistent with levels broadly in line with the past two years. The current export figures are still solid showing annual growth of around 4%, with activity generated from European and Asian markets. Furthermore, the much-watched Ifo Business Climate Index remained very positive at 103.9 in August 2018 (2015=100). Although moderating from historically high levels from December 2017 (63.3), the Purchasing Manager Index of around 56 (August 2018) shows no signs of a slowing economy, but rather signals further economic expansion over the short term.
A further indication of the investment climate in Germany is activity from institutional parties. Due to the lack of alternative investments and attractive spreads between real estate and bond yields, German open-ended Spezialfunds are gaining popularity. Insurance companies and pension funds lacking in-house expertise in real estate, are increasingly using these vehicles to invest in domestic and overseas real estate markets. Net-inflows into German Spezialfunds have been on an upward trajectory. After the highest recorded rolling annual figure of €12.55bn in September 2017, these remain stable above the €10bn mark since then. In contrast, the net-inflows of open-ended public funds have flatlined in recent months. The reason for that is not decreasing private investor appetite, but rather the fact that the majority of open-ended public funds have restrictions on accepting new inflows, due to both the scarcity of suitable properties and regulatory limitations.
Source: Deutsche Bundesbank