The German Real Estate Market 2024 | 4

The German economy remains in a period of weakness. While gross domestic product (GDP) rose by 0.2% in the third quarter of 2024 compared with the previous quarter, there are still no signs of a sustained recovery. The ifo Business Climate Index improved by 1.1 points to 86.5 in October 2024, but stayed below the previous year’s level. The seasonal upturn in the labor market is also weaker than expected. As of October 2024, the unemployment rate stood at 6.0%, 0.3 percentage points higher than the previous year. Employment also grew at a slower pace than in the previous year.

Although inflation eased slightly overall and stood at 2.0% for October 2024, it is still higher than the previous month. Energy prices continued to decline, while prices for services and food rose. In light of easing infla­tionary pressures, the European Central Bank (ECB) cut its key interest rates again by 25 basis points in October, with the main refinancing rate now standing at 3.40%. The ECB intends to continue basing future interest rate decisions on economic data.

The federal government expects GDP to decline in 2024 and has revised its forecast to –0.2%. In addition to weak domestic and inter­na­tional demand, struc­tural factors are weighing on economic growth. A moderate recovery in gross domestic product is expected in 2025.