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Germany 'normalizes' as house prices rise
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Germany 'normalizes' as house prices rise

Published: 10 Feb 2014 12:55 GMT+01:00

Cheap loans and rising incomes are the two main drivers of the trend for Germans to increasingly buy rather than rent their homes, suggests the study by Regensburg University's Institute for Property Economy.

The authors of "German domestic property as capital investment", published on Monday, said that although the market showed some symptoms of a boom, there was no danger of a bubble bursting.

Anticipated price increases would simply make the German market more normal, said Jochen Möbert, property expert at Deutsche Bank, which commissioned the study.

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"In the current year, the price of one-family houses could rise by an average of three percent, and that of new-build flats by five percent," he said. Not only the low interest rates charged on loans for property purchase, but also the continuing demand were responsible, he said.

But other considerations were also playing a role, suggested Tobias Just from Regensburg University. He said that demographics, economic and financial reasons had contributed to an underlying annual three percent price rise in house and flat prices across Germany.

Strong immigration to Germany, continuing urbanization and a clear increase in employment rates had also been factors in pushing up prices, he said, also mentioning the insecure situation for many on the financial markets as a prompt for a flight of capital to property.

Möbert said the typical symptoms of a property bubble such as an over-generous credit system, an overheating of the economy or a clash of price and rent rates were not to be seen.

The real credit growth in Germany is continuing very moderately," he said. "We are far away from a price dynamic like in southern Europe or the USA before the financial crisis."

READ MORE: Berlin to ban holiday lets in city centre 

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