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Bundesbank warns of overheated real estate market


From the Bundesbank's point of view, the prices of residential real estate are well above the value that would actually be justified. This is increasingly the case outside of the metropolitan areas.

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Residential houses in Berlin-Mitte


Christoph Soeder / dpa

The Bundesbank is concerned about the widespread rise in prices for houses and apartments in Germany.

"According to our calculations, the prices of residential real estate are 10 to 30 percent above the value justified by fundamental data," said Bundesbank Vice President Claudia Buch according to the speech at the presentation of the Deutsche Bundesbank's financial stability report.

This is increasingly the case outside of the metropolitan areas.

"Rising real estate prices can be critical for financial stability if more loans are granted with greatly relaxed lending standards and rising prices are expected," Buch explained.

Around half of the bank loans for residential property have a fixed interest period of more than ten years.

"A high proportion of long-term loans and investments makes the German financial system vulnerable to interest rate risks," explained the Bundesbank.

Overall, the financial system worked well during the pandemic, the central bank said.

“The extensive government measures have protected the financial sector from losses.

But vulnerabilities continue to build up - to negative macroeconomic developments and especially on the real estate market. "

Risk of prolonged inflation

The Bundesbank board member responsible for banking supervision Joachim Wuermeling said: "The German financial system is currently sufficiently resilient to be able to cope with a slowdown in economic development."

At the same time, Wuermeling warned that the financial institutions would have to arm themselves in the event of a change in the interest rate environment.

This could be the case if the current rise in inflation is much stronger or longer than expected.

In the short term, rising interest rates would have an impact on the banking sector in particular: refinancing costs would increase immediately, but income would only rise slowly.

"Now is the right time to prevent future risks," said Buch.

The European Central Bank (ECB) was recently worried about the rapidly growing housing markets in Europe.

The central bank pointed out that house prices in the euro area had risen more rapidly in the second quarter than they had been since 2005.

At the same time, there has even been a loosening of the standards for granting mortgage loans.

The sharp rise in house prices of around seven percent remains "a cause for concern," warned the ECB.

However, the banks in the euro zone are expecting slightly stricter standards for issuing corporate loans in the autumn quarter, as the latest ECB survey of 146 financial institutions shows.

hej / dpa

Source: spiegel

All business articles on 2021-11-25

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