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Germany's property prices jump amid low interest rate

January 15th 2020

By The Business Time

German property prices jumped in the third quarter as record-low borrowing costs and housing shortages continued to push up demand for apartments in urban areas, data showed on Monday.

Prices for owner-occupied dwellings in Germany's seven largest metropolises rose by 9 per cent year-on-year from July till September, the Federal Statistics Office said.

Prices for single-family and two-family houses in Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Dusseldorf were up 7.5 per cent year-on-year in the third quarter.

Among the factors pushing up residential property prices are the European Central Bank's ultra-low interest rates, capacity constraints and bottlenecks in the construction sector as well as an influx of people to cities, a spokesman for the Federal Statistics Office said.

Officials from Germany's central bank, the Bundesbank, have repeatedly warned that real estate prices in cities may be 15- 30 per cent overvalued, hinting that a property bubble may be developing, a potential risk for financial stability.

The federal government has made billions of euros for social housing available, but the outflow of earmarked funds has been slowed down by planning bottlenecks at local authorities and capacity constraints in the construction sector.