Fall in Housing Prices Would Pose Little Threat to Germany's Financial Stability

A perceptible drop in the price of residential properties in Germany's major cities would not endanger the country's financial stability in any serious way. This is the finding of a survey carried out among over 200 financial market experts in March 2017 by the Centre for European Economic Research (ZEW), Mannheim, as part of the monthly ZEW Financial Market Survey. Nevertheless, the overwhelming majority of the surveyed financial analysts agreed that housing prices in Germany's major cities were currently fundamentally overvalued.

A reduction in the price of residential property by 20 per cent or more within the next twelve months, meanwhile, was seen as highly unlikely by the experts. A downward adjustment of the same magnitude over the space of five years was, however, considered a perfectly possible scenario. If this were to happen, local financial stability would nonetheless be only moderately affected, with just one in ten of the surveyed financial market experts saying they anticipated a large or very large impact on the financial situation in this case. By contrast, more than half said they expected falling housing prices to have only limited or very limited effects on the financial health of the German banking system and private sector.

For further information please contact

Dr. Oliver Lerbs, Phone +49 (0)621/1235-147, E-mail:lerbs@zew.de