The start to 2012 appeared highly promising with gross domestic product growth of 0.5% in the first quarter. Since then, however, economic activity has noticeably declined, meaning that lower growth rates are anticipated for the subsequent three quarters. Nevertheless, the German economy remains in good health. Employment has reached an all-time high with almost 29 million employees subject to social insurance contributions while the unemployment rate currently stands at its lowest in decades at 6.6%. In addition, significant increases in some wages and salaries mean that a large proportion of the German population is enjoying higher income.
Germany’s corporate rationalisation and subdued wage growth have supported a high level of competitiveness. “Underpinned by healthy corporate and household balance sheets, higher wages, well-anchored inflation expectations and low borrowing costs, growth is poised to reach potential in the second half of 2012,” the IMF said. Fears that the Eurppean crisis would dampen growth had a negative impact on consumer confidence in the early part of 2012. However, by the middle of the year, the positive impact of rising wages outweigh these concerns. In addition, the German household sector is strengthened by the fact that it is not dealing with the aftermath of a property bubble or large increases in consumer or mortgage debt.
According to Savills, with a commercial property transaction volume of Ã¢â€šÂ¬8.97 billion, investment declined by approx. 18% in the first half of 2012 compared with the same period last year. The retail sector dominated with a 43% share of the transaction volume. This was followed by offices (27%), dev. sites (9%), industrial / logistics properties (6%) and hotels (4%). On the other hand, the transaction volume for residential portfolios amounted to approximately Ã¢â€šÂ¬6.13bn in the first half of 2012. This represents an increase of 75% compared with the same period last year and already exceeds the total volumes for the years 2008 to 2011.