According to Bundesbank calculations, the overvaluation of residential real estate has increased again.
(Photo: dpa)
Frankfurt According to calculations by the Bundesbank, the price trend for residential real estate accelerated again in 2021. “The overvaluations increased in the year under review,” says the current monthly report.
Various indicators are pointing to the highest price increase since the start of the upswing on the residential real estate market. For example, the house price index of the Federal Statistical Office rose by 10.6 percent on average in the first three quarters of 2021.
According to the Bundesbank’s current estimates, in 2021 real estate prices in cities were “between 15 and 40 percent above the price indicated by socio-demographic and economic fundamentals”. Last year, the Bundesbank had still assumed an overvaluation of a maximum of 30 percent.
She also states that rents and purchase prices are increasingly decoupling. The rent level for new contracts has hardly increased. According to calculations by the analysis company Bulwiengesa, the increase was 2.5 percent in the cities. In the seven major cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart it was 2.75 percent.
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In addition, the Bundesbank analyzes the supply and demand side of the real estate market. She points out that disposable income in 2021 would only have increased moderately by 1.8 percent. The level of interest rates, on the other hand, remained practically unchanged with an average interest rate for mortgage loans of 1.3 percent across all fixed-interest periods. In view of the low increase in income and the sharp rise in prices, real estate has become more difficult to afford for many people.
On the supply side, there have been delays and additional price increases due to delivery bottlenecks for advance services. The material costs for construction work rose by 13.4 percent in the third quarter of 2021.
Nevertheless, the Bundesbank assumes that around 310,000 apartments were completed last year, as in 2020. At 380,000 units, the number of building permits was up on the previous year.
The Bundesbank has been warning of increasing risks on the German housing market for some time. The skyrocketing real estate prices in Germany and other European countries have meanwhile called the EU risk monitors into action. According to the European Systemic Risk Board (ESRB), Germany should do more to contain the price surge.
The financial supervisory authority Bafin recently raised the so-called anti-cyclical capital buffer from zero to 0.75 percent, so that banks have to build up larger crisis cushions again. In addition, a special systemic risk buffer for real estate loans of two percent is to be introduced.
More: Real estate market overheating: Financial regulators are setting stricter rules for banks