Demand for German residential real estate is still robust, but the pace of rising prices is easing, an investment specialist said Friday. Stefan Mitropoulos, an analyst at Helaba, a major bank in Frankfurt, told dpa the market was being driven by Germans eager to invest.
"The low interest rates for housing finance mean that buying property remains affordable, even after prices have risen," he said, adding that near-zero returns on fixed-interest investments continued to push wealthy Germans towards real estate as the best alternative.
Germany's rising prices have contrasted with the cooldown in China's real estate market, where tumbling prices this year brought a multi-year property bubble to an end.
Signs have been growing in recent weeks that the German economy is growing again after narrowly avoiding a recession in the third quarter, when it grew by a meagre 0.1 per cent.
The Bundesbank, Germany's central bank, said in its November report that residential property in Germany's seven biggest cities had gained an average 5.75 per cent in value on an annual basis in the third quarter, an easing from 7 per cent in the first half of this year and 9 per cent last year.
Mitropoulos forecast that residential price rises would continue in 2015, noting that the European Central Bank (ECB) has set its prime interest rate at 0.05 per cent. He said ordinary Germans can now pick up 10-year mortgage loans at 1.7-per-cent annual interest.
"German residential property remains affordable and there is anecdotal evidence that both foreign and institutional investors are being drawn to the German real-estate market," Deutsche Bank said in a market overview last month for its customers.
The bank added that German residential real estate prices have risen 20 per cent in the past five years nationally, while prices in the big cities, where land availability is limited, had risen by more than 40 per cent in that time.