German house prices being overvalued according to Bundesbank

  • 11 years ago
  • Uncategorized

Germany’s central bank is warning potential property investors of a housing boom in the country, with house prices becoming unjustifiably expensive. 

The Bundesbank has said that properties in the country are being overvalued by as much as 20 per cent because of foreign investors.

The warning adds to concern that the European Central Bank’s monetary policy is far too relaxed, with the bank’s main refinancing rate at an all time low of 0.5 per cent. 

The rapid price hikes have affected Germany’s seven main cities the most, flats in Berlin, Munich, Hamburg, Dusseldorf, Stuttgart and Cologne had on average seen prices rise more than 25 per cent since 2010. Despite these considerable price jumps, the Bundesbank does not think that it will lead to financial instability.

Experts say that this also demonstrates that international investment is at the heart of the rising property prices around the world, the trends reflect the lack of opportunities for investors to make money in bonds and stocks, reports.

Senior economist at ING, Carsten Brzeski told that despite the beginnings of regional exaggerations, a bubble does not seem to be in the offing in Germany.

Mr Brzeski said: “There are no reasons, yet, to call the latest developments the start of a typical bubble as experienced in other countries before.”

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