• Germany edition
 
Property prices soar but 'no danger of bubble'
Photo: DPA

Property prices soar but 'no danger of bubble'

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

Don't miss...X
Left Right

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
Man shot in tax office dispute
DPA

Man shot in tax office dispute

A tax office worker in the Schleswig-Holstein town of Rendsburg died in hospital after being shot on Monday morning. READ  

Merkel details Iraq arms shipment to MPs
Angela Merkel addressing the Bundestag on Monday as her ministers look on. Photo: DPA

Merkel details Iraq arms shipment to MPs

UPDATE: Chancellor Angela Merkel addressed the Bundestag on Monday to explain her government's decision to send weapons to Iraqi Kurds fighting terrorist group Isis. READ  

Olympic visions compete in Berlin and Hamburg
Berlin and Hamburg mayors Klaus Wowereit and Olaf Scholz on Monday. Photos: DPA

Olympic visions compete in Berlin and Hamburg

Germany's capital and its gateway to the North Sea each released details of their Olympic bids on Monday as the race for the 2024 or 2028 summer games nominations picks up momentum. READ  

Vacationer killed by Baltic Sea bacteria
Photo: DPA

Vacationer killed by Baltic Sea bacteria

Six people were infected with a bacteria from the Caribbean which has made itself at home in the popular German vacation destination. One of them is now in a coma. READ  

UN applauds Germany's help to refugees
DPA

UN applauds Germany's help to refugees

UNHCR Commissioner Antonio Guterres is lauding Germany's role in accommodating the influx of refugees in Europe, while pointing at the imbalance of effort within the EU. The federal government has pledged to do more. READ  

Energy-sucking vacuums no longer welcome
Photo: DPA

Energy-sucking vacuums no longer welcome

Starting on Monday, vacuum cleaners drawing more than 1600 watts can no longer be brought into Germany. The ban is part of a an EU-wide environmental protection measure. READ  

Coalition horsetrading starts after Saxony vote
CDU leader Stanislav Tillich with SPD Martig Dulig. Photo: DPA

Coalition horsetrading starts after Saxony vote

Chancellor Angela Merkel's Christian Democratic (CDU) party is in search of a new partner after the expulsion of its former allies the Free Democrats (FDP) from the Saxon state parliament. READ  

Presented by Phorms Education
Bilingual education from nursery to graduation
Photo: Phorms Education

Bilingual education from nursery to graduation

A network of German based schools is changing how students learn languages by introducing English and Deutsch from day one, with the method yielding impressive academic results. The Local finds out more about Phorms Education. READ  

JobTalk Germany
'German bosses need to praise more'
More of this? Photo: Shutterstock

'German bosses need to praise more'

What do German bosses need to do to get more out of their staff? Frankfurt-based business consultant Justin Bariso has this advice. READ  

Train drivers take their turn to strike
A banner announcing a previous rail strike in June is displayed in a station. Photo: DPA

Train drivers take their turn to strike

A train drivers' union has warned of a nationwide strike to take place on Monday evening as it seeks leverage in negotiations with Deutsche Bahn. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Sponsored Article
Bilingual education from nursery to graduation at Phorms
Photo: Shutterstock
Gallery
Ten of the oddest things found by German border control
Photo: Gerkan, Marg and Partners/Tegel Projekt GmbH/J. Mayer
Berlin
How will Berlin look in five years' time?
Photo: DPA
Culture
Sprechen Sie Deutsch? 10 reasons why you should
Photo: DPA
Gallery
The best of Berlin's mayor Klaus Wowereit in 14 pictures
Photo: DPA
Politics
Germany sends burgers and sausages to Kurds
Photo: Matthias Kock
National
Tribes, ties and a movie: A German's Afghan life
Photo: DPA
Gallery
10 things to do before summer in Germany is really over
Photo: DPA
Gallery
The mysteries of Berlin's abandoned theme park
Photo: Europeana.de 1914 - 1918
Gallery
A German soldier's life behind WWI lines
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
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

3,430
jobs available
Toytown Germany
Germany's English-speaking crowd