14
GERMANY
ISSUE
I
ANALYSIS
F
or years the general economic climate
in Germany experienced a weakening
in the domestic economy, yet Germany
was able to show positive growth rates due
to strong export activity. However, this no
longer applies today at least in this dichot-
omy and that is good news. Thanks to the
declining unemployment rate, thanks to
the high level of immigration of particu-
larly skilled Southern Europeans in the in-
itial years after the financial and economic
crisis and thanks to the resulting need to
create significantly more housing in cities
than in the ten years before the crisis, the
German domestic economy has become
the driving force. GDP rose in 2016 by
nearly 2%, even adjusted for prices. The
unemployment rate fell to roughly 6% in
2016. That is nearly half of the value for
2005. It’s no wonder that the Ifo Institute’s
survey of German companies on the busi-
ness situation until the end of 2016 was
positive overall. Even the expectations
component recently improved. For 2017,
most economists expect the upturn to con-
tinue with only a few slight interruptions.
Private consumption alone accounts
for more than 50% of GDP, construction
activity makes up a further 10%. If things
continue to run smoothly in both of these
segments, then we can tolerate a few eco-
nomic risk factors from abroad without
too much worry. However, it is also true
that concerns about foreign trade and
foreign affairs are growing rather than
declining. A slowdown in growth is quite
likely in 2017 and this will impact each
Global Economic Uncertainties –
The Domestic Economy is Fortunately Intact
Everything is running smoothly in Germany: Private consumption alone accounts for more than
50% of Germany’s GDP, while construction activity makes up a further 10%. However, there is
growing concern over foreign trade and foreign affairs. Growth is likely to slow down and this
will impact the real estate market in different ways.
real estate segment differently. Ultimately
a cocktail of four different massive sources
of insecurity is brewing outside of Ger-
many (there are actually even more fires
burning, but from an economic perspec-
tive, the following four explain the bulk
of uncertainty in the German real estate
industry).
UNCONTROLLED DISINTEGRATION WOULD
BE RISKY
First, the debt crisis in Europe
has not yet been overcome and the res-
cue package for Italian banks shows that
it was and still is not merely a sovereign
debt crisis, rather there was and still is a
much deeper debt problem. Recent devel-
opments have been conducive neither to
A cocktail of different
massive sources of insecurity
is brewing outside of Germany
