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Germany's property prices jump amid low interest rate

German property prices jumped in the third quarter of 2019 as record-low borrowing costs and housing shortages continued to push up demand for apartments in urban areas, newly released data shows.

Prices for owner-occupied dwellings in Germany's seven largest metropolitan areas rose by 9% year-on-year in Q3 last year, the Federal Statistics Office said. Prices for single-family and two-family houses in Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Dusseldorf were up 7.5% year-on-year in the third quarter.

Among the factors pushing up residential property prices are the European Central Bank's ultra-low interest rates, capacity constraints and bottlenecks in the construction sector as well as an influx of people to the bigger cities, a spokesman for the Federal Statistics Office said.

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Officials from Germany's central bank, the Bundesbank, have repeatedly warned that real estate prices in German cities may be 15-30% overvalued, hinting that a property bubble may be developing. The federal government has made billions of euros for social housing available, but the outflow of earmarked funds has been slowed down by planning bottlenecks at local authorities and capacity constraints in the construction sector.

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