German policymakers, ever wary of rising prices, have begun to fret that their housing market could be developing a bubble.
In 2010 and 2011, house prices rose by 2.5% and 5.5% respectively. In Berlin and Munich, apartment prices increased by around 10% last year. Sales have soared: "German apartments are getting ripped out of people's hands", says Andre Adami of BulwienGesa. Rents are buoyant, having climbed by 8.3% in Berlin over the past 12 months.
So far "house-price increases look sensible", says Rene Schultes in The Wall Street Journal. "There is an element of catch-up." House prices fell in inflation-adjusted terms between 1995 and 2009. The fundamentals support higher prices, with demand climbing as more people choose to live alone and supply struggling to catch up with this trend.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A hallmark of a housing bubble is crazy lending, and there's no sign of that yet. Residential mortgage loans are up by just 1% a year in the past decade. "For now, rising prices in Germany are a healthy... sign."
-
How taking a two-year career break could leave a £26k hole in your pensionCareer breaks are increasingly common but it is important to take steps to protect your pension, as gaps compound over time
-
Cash in on your attic: Thousands could be sitting dormant in your storageSelling your valuables at auction could be far more lucrative than you think. We take a look at how auctions work, and some tips to help you maximise your profits
