When bursting the real estate bubble?

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Real estate

When bursting the real estate bubble?

The real estate boom in Germany, takes in the view of Commerzbank in an ever more features of a bubble. A result of the expansionary monetary policy of the ECB, says chief economist Jörg Krämer.

“The ECB President Mario Draghi administered medicine has many side effects,” says Commerzbank chief economist Jörg Krämer. “One is that you are fuelling in Germany, the prices for houses.” Actually, the prices are on the rise since 2010, faster than Rents, consumer prices and the income of private households. At the same time, mortgage rates are expected to fall, but barely, says Krämer.

“The experience from the United States teaches that in the medium term, with more climbing real estate prices, the risk of a significant correction is increasing,” explains Krämer. To have already at the beginning of this year, he warned of Exaggerations in the German real estate market. Since then, the signs of a bubble formation have further increased.

Jörg Krämer: medicine with side effects

Because with more than five percent compared to the previous year, the houses are likely to be increased prices in the first half of the year similar to that during the real estate boom in the late 1980s. In the big cities you have places even more.

In Germany, real estate prices rise for the sixth year in a row faster than Rents, consumer prices and the income of private households. The corresponding ratios are still significantly lower than prior to the Millennium change, but the shopkeeper sees no reason to sound the all-clear. Because at the time, Inflation was much higher, and therefore the income and Rents rose faster. This is no longer the case today. Thus, the net cold rent increased between 1975 and 1999, per year, to more than four percent, while the annual Plus has been the year of the new Millennium, fairly constant over percent.

Price driver ECB

The main drivers of the price boom Krämer “without question, in the expansionary monetary policy of the ECB, for the foreseeable future nothing will change.” However, this does not mean, that a striking change of course of the ECB and, therefore, significantly rising interest rates, the risk increases. The trend reversal or price correction can occur much earlier.

This is a look at the US shows. In retrospect, the problems in the year 2003 began there, as the interest rates fell, as before, the property prices unabated, but increased. From this time on, the rising prices from the perspective of the buyer have not been offset previously due to falling interest rates. Houses were to Finance for households is so severe.

In Germany, the financing of a home purchase resulting loads have been reduced by the beginning of 2015, because of the strong interest rate decline and rising incomes have offset the rise in house prices more than. Since then, the increase of houses has won prizes, however, once more to pace, but interest rates have not fallen, so that houses are becoming less affordable.

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No Excess Debt

In Germany, the Commerzbank, according to calculations by economists, the financing cost of an average house in relation to the average income of a private household, although still significantly lower than at the beginning of the houses price increase in 2009. But hardly more is to be expected with a further decline in interest rates is likely to continue with this from the point of view of the housing market unfavorable trend, as long as the prices are on the rise as strongly as currently.

The tensions on the housing market to do so, albeit from a rather low level. The yield should rise in ten-year Federal bonds during the course of the next year, even gradually, and the mortgage rates follow them, would only reinforce this trend. “Even if the Bursting of a bubble is almost impossible to predict: There are at least signs that warn’s medium-term caution,” says Krämer.

After all, it is reassuring that German real estate buyers tended to blame the excesses, such as, for example, in Spain or in the United States. So, the stock of housing loans had not increased, although slightly stronger than the income of households is, however, far not in the extent as during the boom in the nineties. And the debt ratio of private households – so all of the debt in Relation to gross domestic product has fallen at least by the end of 2015 even more, while she had in Spain and the USA.