German property prices up to 35% overvalued: Bundesbank

[FRANKFURT] Real estate prices in German cities may be 15 to 30 per cent overvalued, the Bundesbank said on Monday, warning that the deviation may be as much as 35 per cent in the biggest cities like Berlin, Frankfurt or Munich.

With the German economy booming and interest rates at record lows, the central bank has long warned that property bubbles may be developing, a potential risk for financial stability.

The European Central Bank has also acknowledged the issue but noted that property bubbles were not a general phenomenon in the 19-member euro zone and were limited to a few key cities and to prime commercial real estate, requiring local prudential measures, not a change in monetary policy.

Rent costs for new leases increased by 7.25 per cent in Germany last year while in the seven biggest cities, the increase was 9.25 per cent, the Bundesbank said in a monthly report.

REUTERS