With a view to the unconventional monetary policy measures implemented in the euro area in recent years, this study aims to investigate whether the recent house price increases in Germany are signals of an incipient overheating of the German housing market.
This paper presents a valuation measure for residential property based on a large and exhaustive regional panel data set for Germany. The fitted house prices from a panel regression at the district level, taking into account spatial spillovers, are taken as a measure of the fundamental equilibrium house prices, which can be aggregated for various regional subsets.
The estimation results suggest that apartment prices over the past years substantially exceeded the fundamental price suggested by the model, in particular in the big cities. Single-family houses appear to be markedly overvalued mainly in the cities. The low level of interest rates in recent years appears to have contributed to the emergence of misalignments.
Exploiting the variation across local housing markets, the estimation approach provides value-add for the estimation of house price valuation results in various regional subsets, as conventional time-series approaches to valuing property are subject to severe data limitations in the case of Germany.
The authors thank John Muellbauer and participants at seminars at the Bundesbank, the Austrian National Bank and the National Bank of Poland for valuable comments and suggestions. All remaining errors are our own. This paper represents the authors’ personal opinions and does not necessarily reflect the views of the Deutsche Bundesbank, the Eurosystem or its staff.
Kajuth, F., Knetsch, T. and Pinkwart, N. (2016), "Assessing house prices in Germany: evidence from a regional data set", Journal of European Real Estate Research, Vol. 9 No. 3, pp. 286-307. https://doi.org/10.1108/JERER-03-2016-0017Download as .RIS
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