According to the Global Real Estate Bubble Index 2023 from the major Swiss bank UBS, there is currently no risk of a real estate bubble in Germany. Frankfurt am Main and Munich were previously considered to be at risk, but have now left a possible bubble threat behind them. However, both cities are still considered overvalued.
The Federal Republic breathes a sigh of relief: the danger of a real estate bubble has been averted for the time being
The UBS Global Real Estate Bubble Index highlights the danger of real estate bubbles in various cities around the world. The index helps to identify potential risks in the real estate market. In this context, Frankfurt am Main and Munich have also attracted attention in Germany.
The inflation-adjusted price level for homes doubled between 2012 and 2022, explains UBS European head Tobias Vogel to WirtschaftsWoche. However, the change in interest rates and high inflation suggested that the boom was over for the time being. However, the two German cities are still overrated. Frankfurt has an index value of 1.27 and Munich even has a value of 1.35. Cities with a value of 1.5 or more are considered to be at risk of bubbles.
DZ Bank: Rising rents on the housing market as a result
According to an article in the Frankfurter Allgemeine Zeitung (FAZ), DZ Bank assumes that residential property prices will fall by four to six percent in 2023. In addition to the increased interest costs, more expensive building materials and investment backlogs also play a role. While real estate prices rose by seven percent in 2022 according to the UBS index, prices are likely to mostly decline this year.
Given the current financing conditions and the uncertainty regarding future energy renovation work, the price decline appears to be even moderate, as the DZ Bank study explains. As a consequence of the current situation, the bank points to rising rents and a growing need for living space. Many new construction projects are currently on hold and a solution is not yet in sight.
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