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Why are Germans looking to buy not rent?

Tuesday, May 13, 2014 - 02:57

May 13 - Germans traditionally rent rather than buy their homes so why is the German property market booming. Joanna Partridge reports from Berlin.

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Some call it concrete gold. The German property market is booming. This, in what's traditionally a nation of savers and renters. But continued low interest rates have led Germans to rethink what to do with their money, with many looking to property. Andreas Schulten is a director at property researchers Bulwiengesa, who publish an annual property index. In 2013, they saw prices rise across the board, especially for new build. SOUNDBITE: Andreas Schulten, Director, Bulwiengesa, saying (English): "An increase of 6.6% in owner-occupied apartments as well as 3.8% in rental apartments. We saw increased interest and that was because of lower interest rates, so apartments became affordable, or financing was not as tough as it was in former times, and fear of inflation was also a driving force." For 15 years following German reunification, house prices hardly rose. And Germany still has an owner occupation rate of just under 45% - 20% lower than in the UK. Traditionally, the countryside has seen more homeowners than cities. Bulwiengesa's index shows the boom is city-centric. In Frankfurt, they're up 18%, around 12% in Hamburg and Munich, and 14% in Berlin. One of the many places in Berlin where the old is making way for the new. An old people's home only built in the late 70s will be replaced by 100 new apartments. It might be unpopular with local residents, but there's certainly demand and the prospect of profit for developers. Germany's capital hasn't just attracted home-grown buyers - Chinese, Scandinavian and Israeli investors have also piled in. But Bulwiengesa doesn't think it's a bubble. SOUNDBITE: Andreas Schulten, Director, Bulwiengesa, saying (English): "For Berlin we have 100,000 new jobs in five years, and if you have an economic phase like this, why shouldn't property go up at the same time. The thing is, what will happen if we will face lower growth rates in Germany." That's what concerns Germany's central bank, the Bundesbank. It's been warning for some time that prices in some cities are becoming overvalued. And it's not alone - Britain's worried that record low interest rates are leading to surging property prices, with the Bank of England considering action. Low rates have also seen prices in Israel soar by around 80% since 2007. In late 2013 the Reserve Bank of New Zealand's limited how much banks can lend to borrowers, which is slowing house price growth. In many countries, the property price boom is putting central banks in a difficult position. They don't want to raise rates too soon, and risk damaging the fragile recovery. But house prices inflating into a bubble poses an equally worrying threat.

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Why are Germans looking to buy not rent?

Tuesday, May 13, 2014 - 02:57