A novel housing price misalignment indicator for Germany

Markus Hertrich

No 31/2019, Discussion Papers from Deutsche Bundesbank

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.

Keywords: composite indicator; fundamental value; housing market; imbalances; loose monetary policy; price misalignment (search for similar items in EconPapers)
JEL-codes: C43 C51 E32 E37 E43 G12 R21 R28 R31 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A Novel Housing Price Misalignment Indicator for Germany (2019)
Journal Article: A Novel Housing Price Misalignment Indicator for Germany (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:312019

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