Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204282 
Year of Publication: 
2019
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 31/2019
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
From 2014 until present, housing prices in Germany have been rising faster than consumer prices in all quarters except one, raising concerns about an excessive over-heating of the housing market. To assess the vulnerability of the German housing market to a future realignment of prices or even a housing bust, this paper develops a housing price misalignment indicator that is composed of seven indicators, which are commonly associated with the fundamental value of residential property. An empirical application to the most recent data suggests that the German housing market exhibits an overvaluation of approximately 11%, where interest rate risk and a relatively advanced stage of the housing cycle are identified as the main factors fueling these imbalances, while a rather solid debt-servicing capacity mitigates these imbalances since end-2009.
Subjects: 
composite indicator
fundamental value
housing market
imbalances
loose monetary policy
price misalignment
JEL: 
C43
C51
E32
E37
E43
G12
R21
R28
R31
ISBN: 
978-3-95729-617-7
Document Type: 
Working Paper

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