German Property Boom Continues

By Hans Esser, for 26 August, 2014

Exceptionally low interest rates in the euro zone and a shortage of housing are continuing to drive a property boom in Germany.

According to VDP, a German banking association, the price of owner-occupied residential property rose by 2.5 percent compared with the same second-quarter period in 2013. However, the increase was 2.6 percent in the case of single-family and two-family properties, and 7 percent for multi-family houses.

Meanwhile, figures recently released by the Federal Statistical Office reveal that the construction or remodelling of 136,000 apartments was approved in the first half of 2014, representing a rise of 9.6 percent over the first six months of 2013 and continuing an upward trend that began in 2010. Further, 118,700 new dwellings were approved over the same period, representing a rise of 7.3 percent, and 12.8 percent in the case of multi-family properties. VDP said that, although new construction is slowly gaining momentum, supply continues to be outpaced by additional demand created as new people move into certain towns.

Other research has shown that prices are increasing in particular in Munich and Frankurt, where new luxury developments have been built. In February, the Bundesbank warned that residential properties may be overvalued by up to 25 percent, and said there are risks of a bubble. However, VDP argues that rises can be explained in terms of "fundamental" reasons, and said the market does not appear to be overheating.

The European Central Bank cut its benchmark interest rate from 0.25 percent to 0.15 percent in June.

Tags: Banking | Real-estate | Germany | Expats | Investment | Property Investment | Invest | Investment |


News Archive