• 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)

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
Lufthansa pilot strike spills into second day
Photo: DPA

Lufthansa pilot strike spills into second day

In the second day of their strike, Lufthansa pilots have, as promised, extended their industrial action to include long-haul international flights until the end of Tuesday. READ  

Merkel tells allies to pay Ukraine's gas debts
Chancellor Angela Merkel in Bratislava, Slovakia, on Monday. Photo: DPA

Merkel tells allies to pay Ukraine's gas debts

Chancellor Angela Merkel on Monday called on Ukraine's allies to help the war-scarred nation pay off its gas debts to Russia, amid concern over gas supplies this winter. READ  

Steinmeier wants epidemic task force
Frank-Walter Steinmeier speaks at the World Health Summit in Berlin. Photo: DPA

Steinmeier wants epidemic task force

At the World Health Summit in Berlin, the Ebola crisis took centre stage at talks meant to create plans for how to handle future outbreaks. READ  

Nazi-stolen painting put on display, sort of
The Wiesbaden Museum in Hessen. Photo: DPA

Nazi-stolen painting put on display, sort of

The Wiesbaden Museum was once a collection house for art stolen from Jewish owners by the Nazi. With one painting, they hope to right at least one wrong while bringing awareness to its ongoing restitution work. READ  

JobTalk Germany
When should interns demand to get paid?

When should interns demand to get paid?

After a woman was denied pay for working at a supermarket as an 'intern' for eight months with no wages, The Local looks at the warning signs for abusive internships. READ  

Single parents, common law families on rise
Photo: DPA

Single parents, common law families on rise

The German family structure is changing, with nearly a third of every family no longer living in the "classic model" and big differences in what family looks like in the former East and West, statistics agency Destatis announced on Monday. READ  

Four arrested in raids against Isis
Photo: DPA

Four arrested in raids against Isis

Police raided 15 homes across Germany over the weekend and arrested four suspected supporters of the Islamic State (Isis). They are alleged to have smuggled a teenager and thousands of winter military clothes to the terrorist group's frontlines. READ  

Munich Refugee Crisis
'There's no room but we have nowhere else to go'
Hassan, pictured outside the Bayernkaserne with two of his children, arrived in Munich from Syria. Photo: Mariane Schroeder

'There's no room but we have nowhere else to go'

Around 300 refugees are arriving in Munich each day, but accommodation centres are full. With authorities struggling for answers, The Local meets those at the sharp end of the crisis. READ  

Train Strike
Buses up prices, football fans brawl, trains return
Photo: DPA

Buses up prices, football fans brawl, trains return

UPDATE: Deutsche Bahn trains are chugging along again after a 50-hour train strike cost the service "tens of millions" and brought travel headaches across the country, leaving millions of passengers struggling for transportation over the weekend as well as at least one mass brawl in its tracks. READ  

Foreigner toll to hit motorways only
Transport Minister Alexander Dobrindt. Photo: DPA

Foreigner toll to hit motorways only

Transport Minister Alexander Dobrindt plans to limit his road toll for foreigners initially to motorways only, Spiegel reported on Sunday. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Photo: DPA
Culture
Can you top our history quiz leaderboard?
Photo: Facebook
Society
German motorcycle gang joins Isis fight
Photo: DPA
Politics
UKIP ‘seeks EU pact’ with German satirical party
Photo: DPA
Travel
This is the man who has stopped Germany's trains
Photo: Shutterstock
Business & Money
Expats: Should I stay or should I go?
Photo: DPA
Gallery
PHOTOS: World's biggest erotic fair opens in Berlin
Photo: DPA/Shutterstock
Gallery
11 things Germans are afraid of...
Photo: Shutterstock
Business & Money
Which expat foods do you miss the most?
Sponsored Article
International School on the Rhine: a legacy
Photo: Shutterstock
Business & Money
How to get hired at a Berlin startup
Photo: DPA
Gallery
The ten richest people in Germany
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
Sponsored Article
Bilingual education from nursery to graduation at Phorms
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

3,464
jobs available
Toytown Germany
Germany's English-speaking crowd