Homes in big German cities overvalued by 20%

[BERLIN] Apartments in Germany's largest cities may be overvalued by as much as 20 per cent as home construction fails to keep up with demand, the Bundesbank said.

Apartment prices in parts of Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Dusseldorf have risen by more than 25 per cent on average since 2010, the Bundesbank said. Prices in areas around those cities may be climbing due in part to speculation.

"The price pressure on residential property markets will probably not ease up in the near term," the Bundesbank said in its October report. "However, it's not very likely that the current price dynamics on the property market are already leading to significant macroeconomic risks."