Wednesday, October 23, 2013

Germany’s Central Bank Warns of Local Housing Bubbles


Tue., October 22, 2013
Germany’s central bank, the Deutsche Bundesbank, sounded an alarm Monday, warning that urban real estate in the country could in some cases be significantly overvalued, against a backdrop of low interest rates, The Wall Street Journal Real Time Economics blog reported. In a report issued Monday, the Bundesbank said that prices in urban housing markets could be as much as 10% higher than the level suggested by fundamentals, such as demographic and economic factors. Furthermore, “in the attractive large cities, the upward deviations in this segment are as high as 20% in some cases”, the report said, referring to Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf. Experts are now speaking of concentrated “local bubbles” in the metropolitan areas, but these do not have the same potential to bring down the economy the way overheated housing markets did in parts of the U.S. and Europe’s geographic periphery.

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