Germany Property Overvalued, Bundesbank Warns

The Bundesbank has issued a warning over properties in Germany, saying that they are overpriced.

According to Reuters, the warning comes as housing demand in the country increases due to rising number of migrants and low borrowing costs. With these, home buyers are prompted to spend their savings on expensive properties.

According to the bank, an apartment with 100 square meters of space in Frankfurt, for example, now costs over a million euros. "Apartments in the big cities continue to show the biggest overvaluations," said the Bundesbank in its monthly report. The trend has been observed amid new laws introduced to limit the rental rate increases in the country.

In another news, it is hoped that the housing shortage in Germany can be addressed through the German Cabinet's approval of a tax incentive bill which will encourage construction of new affordable apartments. A report from Tax-News.com said that according to the Finance Ministry, the bill will provide a special temporary depreciation scheme for the development of new rental units in areas lacking apartments. Almost one-third of construction costs can be deducted within three years through this tax break.

Only constructions worth less than €3,000 ($3,340) per square meter can qualify for the incentive, which will be available to those developers securing permits from 2016 to 2018.

"The housing market in Germany is tense in some regions, especially in the large cities lacking apartments," said Finance Minister Wolfgang Schäuble. "We now need to set the right incentives and promote the construction of new apartments."

The shortfall in housing supply, particularly apartments, is expected to continue with the expected arrival of 800,000 refugees and asylum seekers this year. In 2015, over a million migrants arrived in Germany.

"In the future, the strong migration of refugees will be reflected in the availability of apartments as well as having a moderate impact on the rate of property price rises," the Bundesbank said.

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