Is Germany heading toward a housing bubble?

Unprecedented price growth stokes concerns that homes are overvalued

TRD New York TRD WEEKEND EDITION /
Apr.April 21, 2018 02:00 PM

Berlin apartments (credit: Flickr)

German home prices have climbed by about 60 percent since 2010, and the unprecedented rate of growth is stoking concerns of a housing bubble.

Berlin, for example, recently came in atop a list compiled by Knight Frank in the fourth quarter of last year of the globe’s top 150 residential real estate markets. Housing prices grew slightly more than 20 percent on the year, bucking the global trend of slow price growth in urban areas.

Hamburg, Munich and Frankfurt were also in the Top 10.

But the ratings agency Fitch last week predicted that German price gains of 8.6 percent last year will fall to 5 percent this year and 3 percent in 2019, Bloomberg News reported. And in January, Germany’s central bank expressed concern that properties in places like Berlin, Frankfurt and Munich could be as much as 35 percent overpriced.

A potential drop in immigration could negatively impact the market.

“Market crashes are typically caused by too much construction, and the opposite is true in many German cities,” said Michael Voigtlaender, a senior economist at the German Economic Institute.

But one German real estate investor is hearing none of that bubble talk. Deutsche Wohnen SE, which owns more than 160,000 apartments, has spent more than $5.5 billion since 2008 to double its rental income by acquiring two large portfolios through mergers and acquisitions.

“For 20 years, we had no growth in Germany at all — nothing,” said company CEO Michael Zahn, explaining his confidence in the market. “We’re now making up for lost ground, but that doesn’t mean the market has peaked.” [Bloomberg]Rich Bockmann


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