The German Bundesbank has sounded the alarm about rising prices for apartments in Germany's largest cities, claiming they could be overvalued by as much as 20%.
The German Bundesbank has sounded the alarm about rising prices for apartments in Germany's largest cities, claiming they could be overvalued by as much as 20%.
'After the real estate bubbles in the US and several European house markets burst, the German property market, which has been quiet for many years, became more attractive to international investors,' the
Bundesbank said in its monthly report for October.
In some cases, prices of German apartments have risen by up to 60% over the past four years, research by PropertyEU shows.
Steffen Sebastian, Professor for real estate financing at the IREBS Institute of the University of Regensburg, claims the sector is in the middle of a bubble. 'Sooner rather than later, these markets will go from boom to bust.'
Wealthy local and foreign private investors alike have flocked in numbers into the residential apartment markets of Germany's six largest cities which they have viewed as a safe haven in the rough capital market seas since the outbreak of the financial crises in 2008. Since then, the wall of capital has driven prices higher in Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart by up to 60%, almost three times more than rental increases over the same period. As a result, yields have fallen to record lows.
'Today, apartments in the metropolitan areas yield no more than 3 to 3.5% net,' according to Andreas Schulten, member of the board at real estate research centre BulwienGesa in Berlin.
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