MUNICH, March 25 (Reuters) - Residential property prices in German cities are overvalued by 10-20 percent, and even more in some quarters, but there is no property bubble threatening the entire financial system, Bundesbank chief Jens Weidmann said.
“For Germany as a whole, there is no discernible substantial over-valuation of residential property,” Weidmann said in the text of a speech for delivery in Munich on Wednesday.
Germany did not face the risk of a property bubble as credit growth was not particularly dynamic, and most banks remained fairly conservative in their loan issuance.
But Weidmann said residential property price rises in Germany in recent years had been concentrated in cities, particularly large cities like Munich, and these prices were now significantly over-valued.
“We estimate that prices are between 10 and 20 percent above the values that would be fundamentally justified,” he said, adding that over-valuations were even greater in popular areas of big cities.
“In summary, one can say of the German property market: vigilance is absolutely appropriate, but alarmism is unwarranted.” (Reporting by Frank Siebelt; Writing by Paul Carrel; Editing by Catherine Evans)