Real-Estate Boom

Germany's Housing Bubble

ILLUSTRATION - ARCHIV - Die Fassaden von Wohnhäusern aus der Kölner Südstadt (Nordrhein-Westfalen) sind am 23.08.2012 zu sehen. Bremst die Mietpreisbremse den Wohnungsmarkt aus? Das ist die Gretchenfrage vor der Einführung des neuen Gesetzes. Sowohl die Gegner als auch die Befürworter haben gute Argumente. Foto: Oliver Berg/dpa (zu KORR: "Mietpreisbremse als Bumerang? - Streit um neues Gesetz" von 11.12.2014) +++(c) dpa - Bildfunk+++
Too expensive?
  • Why it matters

    Why it matters

    Germans are increasingly becoming a nation of homeowners rather than renters. This, and other factors, has contributed to rapidly growing housing prices, especially in major cities.

  • Facts

    Facts

    • Real-estate prices across Germany have increased by a fifth within five years after decades of relative stability.
    • Prices have risen much more sharply in big cities: Apartment prices in Munich have almost doubled since 2007.
    • Germany has long been a nation of renters rather than homeowners, and arguably has Europe’s best tenant protection laws.
  • Audio

    Audio

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At first glance it seems like good news: Politicians and real estate experts in Germany insist there is no bubble in the country’s housing market.

And it’s even what members of the Bundesbank, the guardians of Germany’s financial stability, are saying. In fact it’s such good news that the central bank repeated it recently in its annual report.

But if there is one lesson to be learned from the many decades of recurring financial crashes, it is that one should never trust the reassurances expressed as part of a herd instinct.

First of all, a bubble is only recognized when it bursts. Second, the lack of action by our financial market watchdogs means one thing above all: Prices could continue to rise uncontrollably. And they will.

Especially in big cities, prices will not only rise unchecked, but will in fact continue to rise at an accelerated pace. After real estate prices were driven up by low interest rates, a housing shortage and international demand, the refugee wave has been added to the mix this year.

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