Germans Fret Draghi Rate Cuts Are Fueling a Housing Price Bubble

Anna Pesch had long assumed she’d be a renter for years to come, but this month she’s buying a three-bedroom house near the German city of Cologne. She’s got Mario Draghi to thank for that.

“We didn’t want our money to keep going into rent,” said Pesch, a 32-year-old speech therapist who started looking for a home two years ago, around the time European Central Bank chief Draghi dropped the benchmark deposit rate below zero. “We prefer to invest,” Pesch said, “especially since prices in our area just keep going up.”

With record-low costs for mortgages and savings accounts earning almost nothing, Germany is warming to real estate investing. For decades, Germans showed a strong preference for living in rented apartments and stowing cash in the bank, but that tradition is fraying as the ECB keeps interest rates near zero. In the past five years, housing costs in Berlin, Hamburg and Munich have jumped by more than 30 percent, prompting official hand-wringing over rising prices.

Bloomberg

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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