REMI Comments on Fears About a German Housing Bubble

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The Real Estate Marketing Insider comments on news of rising prices in German real estate that are causing concerns about an imminent housing bubble like the one that caused the United States 2008 market crash.

The Real Estate Marketing Insider issued a statement on reports in the Washington Post that German experts fear that rising home prices in Germany are the first signs of a dangerous housing bubble; Tobias Nergarden, an international real estate guru, believes that this could be bad for the global housing economy, as the Euro Zone is depending on a strong German economy and a bubble crash could have far-reaching consequences.

In the last few years, Germany has seen property values explode upward. This is largely a response to investors removing money from markets in struggling European economies like Spain and Greece. While much of the Euro Zone has had economic woes in the last five years, Germany’s economy remains strong; so strong, in fact, much of the Euro Zone’s crisis response planning centers around a healthy German economy. Analysts worry that the rising property values in Germany are the beginnings of a bubble, and worry about the consequences should the bubble burst.

These fears are far from unanimous; not all economists agree that a German bubble is imminent, and bubbles are difficult to diagnose. However, the conditions for a bubble are beginning to emerge; low interest rates, unemployment, and an influx of money from new investors and real estate branding. These objectively-good conditions are also prime territory for real estate prices to keep rising, creating a housing bubble similar to the ones that occurred in the United States, Ireland, and, most recently, Spain.

A “bubble” is an economic phenomenon that can occur with any good or product, but often happens with real estate. Real estate bubbles occur when prices on real estate like beachfront home rentals rapidly increase, often to what economists call levels “at variance with intrinsic values;” often, this happens in response to hyper-increased demand, fueled by economic security. When prices become too high, a sudden decline in demand occurs, causing a precipitous drop in prices; this is when the bubble “bursts.” The economic fallout from a housing bubble bursting can be severe, as was seen in the aftermath of the 2008 housing crashes in America and other countries around the world.

German bank officials say that they are preparing for bubble conditions and carefully watching housing prices. Prices in Germany rose about 5.5 percent nationally in 2011, and some estimates place Berlin home prices up 20 percent from a year ago.

The Real Estate Marketing Insider released its statement about news in the Washington Post of Germany’s rising home prices, which are being carefully watched as the beginnings of a housing bubble. Analysts worldwide are expressing concerns about the fallout for the Euro Zone and the global housing market should a bubble form and burst in Germany, which many consider the linchpin of the Euro Zone’s still-fragile economy.

About Real Estate Marketing Insider:
Based in La Jolla, CA, the Real Estate Marketing Insider provides real estate professionals with trade news, insight, and marketing tips.

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