Fears of a property bubble in the euro zone’s largest economy are mounting, with the German central bank warning that house prices in Germany have spiked in as many as 125 cities in the country.
The bank said foreign investment and international demand along with low borrowing costs, which make it easier to finance buying a house, have led to a surge in demand for residential property.
Urban properties are now overpriced by 10-20 percent, the bank said, adding that “in major cities the prices for residential property deviate by about 25 percent.” It added that apartment prices have gone up by 9 percent in Germany’s seven largest cities.
The bank already warned of big jumps in residential property prices in October last year. However this marks its most severe warning.
“Prices for residential property have risen faster than the economic and demographic fundamentals suggest,” the bank said.