German property market heading towards a crash

The German property market could be heading for a crash as prices continue to spiral, the country’s Central Bank has warned.

In its 2017 financial stability report, Bundesbank warned that prices are rising too fast and at unsustainable levels.

The bank’s data revealed that in 2016 property prices in 127 German cities were between 15 to 30 per cent more expensive than they should reasonably expected to be. In 2015, they were considered to be between 10 to 20 per cent overvalued.

During the first nine months of 2017, property prices in Germany rose by 5.6 per cent. Only a couple of counties nationwide didn’t see property price increases during this period.

“The real estate market in Germany is important to the economy as a whole,” said Bundesbank vice-president Claudia Buch on Wednesday. “Experience in other countries has shown that if a real estate bubble accompanied by a strong build-up of household debt bursts, significant economic costs can come in its wake.”

An overheating property market in Germany is a relatively new phenomenon. Home ownership rates in the country are far lower than those seen in many other countries throughout Europe. Only 52.5 per cent of German households are German occupied, compared to an average of 66.7 per cent in the Euro region.

Article published 5th December 2017