Chapter 1Macroeconomic environment

The economic situation in Germany has recently deteriorated again and remains marked by uncertainty. The main cause is geopolitical tensions in the Middle East, which are leading to both rising energy prices and disruptions in global supply chains. Restricted transport routes are hampering trade and making it difficult for companies to plan, as they are increasingly forced to operate on a short-term basis. Against this backdrop, the German government has significantly revised its growth forecasts downward. For the current year, gross domestic product is now expected to rise by only 0.5%, down from the previous estimate of 1.0%. The forecast for 2027 has also been reduced from 1.3% to 0.9%. A noticeable economic recovery remains closely tied to the geopolitical situation. In addition, structural deficits are holding back economic development. Although investment stimulus measures have been announced, their impact has so far been limited, as funds are increasingly flowing into the defense sector, among other areas. As a result, the economic picture is mixed: On the one hand, businesses’ investment expectations have recently improved, particularly in the manufacturing sector and in less energy-intensive industries. On the other hand, overall economic sentiment remains subdued. There are signs of a slight recovery in foreign trade. Exports and imports have recently (in February) risen both month-over-month and yoy, indicating a certain degree of stabilization. The inflation rate rose to 2.7% in March 2026, exceeding the European Central Bank’s target. The main drivers are higher energy prices. A similar level is expected for the year, whilst monetary policy remains restrictive. Although the underlying propensity to spend and save has remained stable so far, uncertainty among private households is growing and affecting consumer sentiment. The consumer confidence indicator is declining, particularly due to dimmed income expectations because of rising prices. A challenging environment is still expected for 2026. Following the previous period of weakness, however, economic development is likely to stabilize in the medium term, supported by an increasing willingness to invest. Impetus is coming from new trade initiatives (India, Australia and other countries) by the EU, which could partially cushion declines in key export markets. At the same time, Europe is becoming more attractive as a stable sales market amid global uncertainties. However, future developments remain heavily influenced by geopolitical factors: ongoing tensions pose risks to energy supplies and the global economy, whilst heightened uncertainty is increasingly becoming a structural feature of the environment.

The European Central Bank’s monetary policy remains unchanged for the time being, despite geopolitical tensions and rising oil prices. The deposit rate has been left at 2.0% for the sixth consecutive time, with the ECB simultaneously emphasizing its ability to act in an uncertain environment. Whilst a stable interest rate of around 2.15% (main refinancing rate) was widely expected for 2026 prior to the Middle East crisis, market expectations have since shifted significantly upwards. Currently, the market is pricing in an average of at least two rate hikes, suggesting a rise to as high as 2.65% (consensus) is possible. At the same time, the capital market has recently shown greater volatility amid rising financing costs. Ten-year EUR swap rates fluctuated between 2.7% to 3.16% in the first quarter of 2026 and, at an average of 2.93%, were around 30 basis points above the level at the start of the year. Overall, the macroeconomic environment therefore remains challenging, particularly for interest-rate-sensitive sectors such as the property market.

The financing environment remains characterized by heightened volatility. Yields on ten-year German government bonds have hovered around 3.0% in recent months, which is also above the average annual level for 2025. Short-term market movements continue to be significantly influenced by geopolitical developments and political decisions, with developments in the US playing a key role in global interest rates and economic trends. For the property markets, this means ongoing market adjustment within a still challenging environment. Investors are increasingly focusing on high-quality properties with sustainable income structures and solid risk profiles.