A look into German housing markets: A bubble call?

Jan R. Kim and Gieyoung Lim

International Area Studies Review, 2018, vol. 21, issue 4, 289-301

Abstract: The steep rise in German house prices in recent years raises the question of whether a speculative bubble has already emerged. Using a modified present-value model, we estimate the size of speculative house price bubbles in the German housing market. We do not find evidence for positive bubble accumulation in recent years, and interpret the current bullish run as reflecting the correction of house prices that have been undervalued for more than 10 years. With house prices close to their fair values as of 2018:Q1, our answer to the question is, ‘Not yet, but it is likely soon’.

Keywords: German housing market; present-value model; price–rent ratio; fundamentals; bubble (search for similar items in EconPapers)
JEL-codes: C32 G12 R31 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:intare:v:21:y:2018:i:4:p:289-301

DOI: 10.1177/2233865918802664

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