Chapter 1Macroeconomic environment

The economic recovery in Germany is progressing only gradually. Based on preliminary figures, the Federal Statistical Office expects minimal growth of around 0.2% for 2025, before a moderate upturn of around 1.1% is likely to emerge in 2026 (Consensus Economics). Political uncertainties and structural deficits are slowing down development. To strengthen growth momentum in the long term, it is necessary to implement the announced investment stimulus measures. The overall economic picture remains contradictory while industrial production has recently benefited from an improved order situation, foreign trade has recorded significant declines. In November 2025, exports fell by 2.5% after adjustment for calendar and seasonal effects, while imports rose slightly. Trade with the US, which remains the most important market for German products, was particularly weak, falling by 4.2% to €10.8 billion. By contrast, the inflationary environment has eased noticeably. In December 2025, the inflation rate was 1.8%, with average annual inflation at 2.2%, the lowest level in a long time. Falling energy and food prices had a dampening effect, while the service sector continues to drive up prices. An inflation rate of around 2.0% is expected for 2026. This means that price developments are close to the ECB’s target value, which currently holds the key interest rate at 2.15%. At the end of the year, consumer sentiment in Germany is cooling while economic expectations are stagnating, both income expectations and propensity to buy are declining. As the propensity to save is also increasing noticeably, the GFK consumer climate indicator forecasts a significant decline of 3.5 points to -26.9 points for the first month of the new year compared with the previous month. Overall, however, the outlook for 2026 is cautiously optimistic. After the economic low point, a gradual recovery will set in with continued moderate momentum and ongoing pressure to adjust. Impulses for more stable global trade and an increasing willingness to invest could gradually support economic development in Germany and strengthen the path to growth.

The European Central Bank is continuing its stability-oriented monetary policy and, in its latest decision, has once again left the main refinancing rate unchanged at 2.15%. The deposit rate for excess liquidity held by credit institutions also remains unchanged at 2%. While in recent months there were still isolated expectations of a slight interest rate cut on the market, expectations have now changed slightly. This confirms the observable trend: capital market interest rates are fluctuating slightly within a narrow range. Accordingly, market participants do not expect either short-term interest rate cuts or a renewed significant tightening of monetary policy. Ten-year EUR swap rates stood at around 2.9% at the end of 2025, some 50 basis points above the level at the beginning of the year. On the economic front, the environment remains challenging. The weak order situation continues to weigh on industry and dampen demand for goods. Despite a more stable economic development overall, German exports declined for the third year in a row in 2025, this time by 0.3%. The export industry is under considerable pressure from higher US tariffs, the appreciation of the euro, and increasing competitive pressure from China.

The interest-rate environment is currently broadly stable. At the end of 2025, the yield on ten-year German government bonds stood at approximately 2.9%, slightly above the annual average. At the same time, geopolitical developments and political decisions continue to trigger intermittent volatility in capital markets. Developments in the United States shape global interest-rate and macroeconomic sentiment and frequently drive the repricing of economic expectations. Despite these uncertainties, the outlook for 2026 is increasingly characterised by continued stabilisation. For real estate markets, this implies a progressively more predictable financing environment, supporting investment decision-making and laying the groundwork for a gradual recovery in transaction activity.