• Germany's news in English
 

Property prices soar but 'no danger of bubble'

Published: 02 Aug 2012 15:58 GMT+02:00

Although Germany has traditionally been a country where people rent rather than buy, and there are laws designed to prevent property speculation, the housing market has boomed over the last few years.

The Cologne Institute for Economic Research (IW) said that the average annual price increase of 4.5 percent since 2010 was well above inflation rates.

It examined prices in five large German cities over the last few years, showing a 39 percent increase in Berlin prices between 2003 and 2011 – and a 31 percent increase in Hamburg in the same period. Munich prices have risen by 23 percent in that period, while those in Frankfurt have increased by 14 percent and in Cologne by 10.5 percent.

Munich remains the most expensive German city to buy property, with an average price of €4,200 per square metre. Hamburg comes second at an average of €3,100, then Frankfurt at €2,900. Berlin still lags behind at an average price of €2,200 per square metre.

Yet the institute said in a statement, there was no reason to fear the kind of disastrous property bubble experienced in the US, Ireland and Spain. “Despite extremely low interest rates, there is neither an expansive money-lending tendency, nor a very high rate of purchase and re-sale,” it said.

Rental prices have generally kept pace with purchase prices, the institute said, creating the impression that the increase in price is a consequence of great demand and a sign of the popularity of German cities.

Jörg Krämer, chief economist at Commerzbank said he would not rule out a property bubble, but that the excesses seen elsewhere would take longer to happen in Germany.“The overheating takes longer here than in other countries,” he said.

“Such a bubble would be unlikely here,” said property expert at Deutsche Bank, Jochen Möbert. This was because money was never leant exorbitantly in Germany.

Michael Hüther, director of the IW, said only if huge amounts of foreign money were to pour into the German property market would a bubble be a danger. German banks were much more conservative about lending money to buy property than those in the US or Spain – refusing to do so if the customer has no capital to contribute.

The German tradition of renting rather than buying also insulates the property market from snap decisions, said economist Michael Voigtländer. “In Great Britain the proportion of house ownership is high – there are barely any rental flats,” he said. This means that as soon as interest rates drop, people in the UK and Spain have to buy something while they can, he said.

DPA/The Local/hc

The Local (news@thelocal.de)

Your comments about this article

16:57 August 2, 2012 by zeddriver
Pardon me. But soaring home prices well beyond the rate of inflation IS a bubble. The hard part is predicting whether the bubble will burst or slowly deflate.
17:56 August 2, 2012 by William Thirteen
actually the Instituts der deutschen Wirtschaft just today released a report stating that, in Berlin at least, this is a bubble

http://www.tagesspiegel.de/berlin/iw-zu-immobilien-in-berlin-auf-berliner-wohnungsmarkt-baut-sich-spekulationsblase-auf/6951264.html
23:38 August 2, 2012 by siba
@ William Thirteen: I read your link. Read carefully, it just says that there could be a bubble in Berlin but even if it was one, the prices would fall slightly. Ohters, like the Mieterbund, do not share this opinion and do not see any bubble. However, the perspectives are good and Berlin is growing in population, there is an urgent need of new apartments..., I am afraid there is no bubble. I wish there was one because prices are rising too fast.
06:16 August 3, 2012 by quiller
Of course, it is not a bubble. Now will the choir, please move to the same hymn sheet and we will sing three verses of "I'm for ever blowing bubbles, pretty bubbles in the air". The song can be sung in English, Spanish, Greek, Italian, Portuguese - future language versions such as German will become available as soon as the translation service meets market demand.
Today's headlines
'Auschwitz bookkeeper' trial nears verdict
Oskar Groening, the 'bookkeeper of Auschwitz'. Photo: DPA

'Auschwitz bookkeeper' trial nears verdict

A former SS officer known as the "bookkeeper of Auschwitz" and a woman who survived the Nazi death camp delivered wrenching testimony in a courtroom on Wednesday as his historic trial neared a verdict. READ  

Assembly robot crushes worker at Volkswagen
A photo of a Volkswagen assembly line, not related to the incident. Photo: DPA.

Assembly robot crushes worker at Volkswagen

A worker was setting up a robot at a Volkswagen factory when the machine grabbed him and pressed him against a metal slab, causing lethal injuries. READ  

Greece crisis
Greek offer 'no basis for discussion': Schäuble
Pro-EU Greeks demonstrate outside the Athens parliament on Tuesday. Photo: DPA

Greek offer 'no basis for discussion': Schäuble

German Finance Minister Wolfgang Schäuble said Wednesday crisis-hit Greece was sending mixed signals in debt talks and called on its government to "clarify its position" before negotiations with creditors can resume. READ  

Weathermen issue snow alert in heatwave
Could this be July in North Rhine-Westphalia? Photo: DPA

Weathermen issue snow alert in heatwave

The German Weather Service (DWD) issued a weather warning for North Rhine-Westphalia (NRW) on Wednesday predicting 5 to 10 cm of snow and winds of up to 60 km/h. READ  

Analysis
How German media shaped the Greece crisis
Angela Merkel faces a battery of microphones and cameras at a eurozone summit in Brussels on June 22nd. Photo: DPA

How German media shaped the Greece crisis

It's often said that German Chancellor Angela Merkel is the one person who truly matters when it comes to how the eurozone deals with Greece. But how much freedom does 'Mutti' really have in the face of the public and the media? READ  

Women trade punches over neglected dog poo
'This is not a dog toilet.' Photo: DPA

Women trade punches over neglected dog poo

Bergisch Gladbach in North Rhine-Westphalia, hometown of supermodel Heide Klum, was once linked in Germans' minds with the catwalk. But now it is just as infamous for a dog walk, after two women came to blows over a mound of pooch poo. READ  

Referee costs Germany dear against USA
Head coach Silvia Neid (r) with Celia Sasic (l) on the bench. Photo: DPA

Referee costs Germany dear against USA

Germany coach Silvia Neid said she found the referee's decision-making 'sad' in her country's 2-0 semi-final defeat to the USA in the Women's World Cup in Montreal on early Wednesday morning. READ  

Train strikes
Train drivers and Bahn bury the hatchet
Three ICE (intercity) trains stand in a siding. Photo: DPA

Train drivers and Bahn bury the hatchet

The Train Drivers' Union (GDL) and Deutsche Bahn (DB) have finally agreed to end their dispute over drivers' work conditions, offering hope that nine months of rail chaos has finally come to an end. READ  

European heatwave
Keep cool and stay safe in the July heatwave
A couple leaping into an open-air pool in Freiburg. Photo: DPA

Keep cool and stay safe in the July heatwave

Here's how to keep cool as the mercury soars during this week's heatwave in Germany. And don't forget your pets! READ  

Former judge to see NSA target list
Photo: DPA

Former judge to see NSA target list

The Bundestag (German parliament) inquiry into spying by the US National Security Agency (NSA) has chosen a former judge to examine lists of targets given to German spies by the Americans. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Society
An eye for an eye? Mum protects child in playground with pepperspray
Politics
Follow our LIVE blog as Europe holds breath over Greece crisis
National
As it happened: Queen Elizabeth's final day in Germany
National
As it happened: Queen Elizabeth's second day in Germany
National
Queen Elizabeth II's first day in Germany - as it happened
National
Bus passengers tell fake racists where to get off
Politics
What's really in the Queen's handbag?
National
Germans say USA doesn't respect freedom
National
Yes, you CAN buy adult e-books before 10pm in Germany
VIDEO: Watch a 93-metre turbine crash to earth in slow motion
Gallery
Who's got a shot at the German Film Awards
Rhineland
Anger over 'child-free' beer garden
National
How do you do, Majestät?
National
Man defends right to pee in public with tear gas
Features
The Germans who won Waterloo for the British
Frankfurt
Should Germany ban circus animals?
Hamburg
Where people are having the most sex in Germany
Culture
Who Wants to be a Millionaire? Not this student...
National
Dresden's three-decade-long red light
Politics
Upper house calls for gay marriage now
Berlin
Berlin named 3rd-best city worldwide
Sport
In search of the toughest firefighter
Business & Money
German firms shine for European engineering students
Gallery
Hitler's paintings up for auction
National
German's 70-year search for murdered US pilot
Politics
What the G7 leaders agreed at Elmau
Business & Money
What really makes Germans happy
National
Playmobil builder leaves worldwide legacy
National
The car share that became a drug run
Politics
What Snowden revealed to Germany
Rhineland
Why wolf cubs are being raised by hand
National
Hitler's booze cave found
National
Environment makes Germany worth living in
Culture
What's top of the charts in June
Gallery
Germany's most beautiful cycle routes
Business & Money
The business case for Britain in the EU
Rhineland
Why farmers are free to pong up the countryside
National
German restaurants among world's best
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

6,949
jobs available
Toytown Germany
Germany's English-speaking crowd