German central bank warns of overblown property prices with the problem spreading

Key Points

  • Claudia Buch, vice president at Bundesbank, said that almost 90% of German households expect property prices to keep increasing.
  • Speaking to CNBC's Karen Tso, she added that her team at the Bundesbank has come up with estimates of about 10% to 30% for price deviations from their fundamentals.

Germany's central bank warned Thursday about skewed valuations in the housing market, calling it a specific vulnerability as property prices continue to soar.

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We have basically seen all indicators prices, credit those indicators kept increasing in Germany and you don't really see a big effect of the pandemic, Claudia Buch, vice-president at the Bundesbank said.

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Speaking to CNBC's Karen Tso, she added that her team at the Bundesbank has come up with estimates of about 10% to 30% for price deviations from their fundamentals.

What's a bit of a new development is that these overvaluations are also more widespread, so they are outside of the big cities ... [and] almost 90% of the households expect prices to keep increasing, she said.

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