Real estate prices: Bundesbank warns of overvaluation

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House construction in Lower Saxony: Prices that can no longer be explained by the fundamental factors

Photo: Julian Stratenschulte / dpa

While real estate sales in Germany have risen to a record high, the Bundesbank sees increasing signs of an overvaluation of residential buildings and apartments in the cities.

According to the latest estimates, which the Bundesbank evaluates in its monthly report, real estate prices in cities last year were between 15 percent and 40 percent above the price "indicated by fundamental socio-demographic and economic factors".

According to a projection by the broker association IVD, buyers of private and commercial real estate spent a total of 353.2 billion euros in 2021.

That was 13.7 percentage points more than in 2020 and more than ever before, as the association announced.

The extrapolation is based on the income from the real estate transfer tax.

This does not show how many houses, apartments, offices or warehouses were sold in the past year.

The sales record is largely due to the steadily rising real estate prices.

The Bundesbank has been warning of overvaluations on the real estate market for years.

The strong price increases in Germany and other European countries recently also alarmed the EU Risk Council ESRB.

However, the Bundesbank report states that the assessment of prices for residential real estate is currently subject to a particularly high degree of uncertainty, partly because of the sharp rise in construction prices.

Experts disagree on whether there is a bubble

According to IVD, the leader in the real estate business last year was Berlin, where sales increased by 26.4 percent.

The least things happened in Bremen, where real estate sales increased by only 4.2 percent.

Whether or not there is a price bubble for home ownership in Germany has long been a matter of debate among experts.

In the construction and real estate industry, it is always pointed out that there is still a lack of apartments in the cities and their surrounding areas and that the demand is significantly higher than the supply.

jlk/dpa