Real Estate

New real estate bubble: experts warn against buying a home

Low interest rates are driving up the number of construction contracts. The prices of existing properties are also exploding. Industry insiders warn of a collapse.

Never before has the German construction industry had such good orders in February as this year. They totaled around 7.1 billion euros, as the Federal Statistical Office announced on Friday.

That was 7.6 percent more than a year earlier “and thus the highest value ever measured” for comparison months. The construction industry proved to be a pillar of the economy in the Corona year 2020.

Promising development for the construction industry

The development of orders suggests that construction production will pick up in the coming months, explained the Central Association of the German Construction Industry (ZDB). Orders in residential construction alone have recently risen by almost ten percent. “We will see in the coming months whether this heralds a sustained recovery,” said ZDB Managing Director Felix Pakleppa.

Meanwhile, researchers are warning of a bubble threat in the real estate market. The setback potential in the first quarter of this year in the seven largest cities in Germany has risen to 46 percent, nationwide to 28 percent, as the “Handelsblatt” quotes from an analysis by the market research institute Empirica.

Condominiums particularly risky

“Of course we have a real estate bubble,” said Empirica boss Reiner Braun. Purchase prices for condominiums that cost more than ten annual incomes in the top 7 cities cannot be achieved in the long term.

Either incomes rose dramatically or prices would eventually fall. “In view of Germany’s dependence on exports and unsolved structural problems, however, income increases across the board are rather unlikely,” warned the expert.

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