• Germany's news in English

Property prices soar but 'no danger of bubble'

The Local · 2 Aug 2012, 15:58

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

Facebook Twitter Google+ reddit

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.

Story continues below…

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)

Facebook Twitter Google+ reddit

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

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
Creepy clown scare spreads to Germany
Two of the clowns were apparently equipped with chainsaws. Photo: Pedro Pardo / AFP file picture

Police said Friday five incidents involving so-called scary clowns had occurred in two north German town, including one assailant who hit a man with a baseball bat, amid fears that Halloween could spark a rash of similar attacks.

Student fined for spying on women via their webcams
Photo: DPA

Student from Munich fined €1,000 for spying on 32 different computers, using their webcams to take photographs, or record their keyboard history.

This is how much startup geeks earn in Germany
Photo: DPA

A comprehensive new survey of 143 startup founders shows how much you are likely to be earning at a German startup, from entry level all the way up to sitting on the board.

Man dies after beating for peeing near Freiburg church
The Johannes Church in Freiburg. Photo Jörgens Mi/Wikipedia

A middle-aged man from southern Germany has died after being attacked by a group of men who took umbrage with the fact he was urinating in the vicinity of a church.

The Local List
Seven German celebrities with uncanny doppelgängers
Former Berlin mayor Klaus Wowereit and actor Alec Baldwin. Photo: DPA; Gage Skidmore, Wikimedia Commons

Check out these seven look-a-likes of well known German figures - we admit that some are more tenuous than others...

Israel seeks to buy three new German submarines: report
A Dolphin class submarine. Photo: DPA

Israel is seeking to buy three more advanced submarines from Germany at a combined price of €1.2 billion, an Israeli newspaper reported Friday.

Here’s where people live the longest in Germany
Photo: DPA

Germans down south seem to know the secret to a long life.

More Germans identify as LGBT than in rest of Europe
Photo: DPA

The percentage of the German population which identifies as lesbian, gay, bisexual or transgender is higher than anywhere else in Europe, according to a new study.

'Reichsbürger' pair attack police in Saxony-Anhalt
File photo: DPA.

A "Reichsbürger" and his wife attacked police officers on Thursday, just a day after another Reichsbürger fatally shot an officer in Bavaria.

Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd