According to the Bundesbank, the price exaggerations on the real estate market have intensified in the past year.

In German cities, residential real estate prices in 2021 were now between 15 and 40 percent above the justified level, as the German central bank announced in its February report published on Monday.

According to evaluations of available indicators, the price deviations in Germany have increased significantly overall, write the Bundesbank experts.

In 2021, residential real estate prices nationwide would be 20 to 35 percent above the reference value.

The Bundesbank has been warning of increasing risks on the German housing market for some time.

The skyrocketing real estate prices in Germany and other European countries have meanwhile called the EU risk monitors into action.

According to the European Systemic Risk Board (ESRB), Germany should do more to contain the price surge.

The financial supervisory authority BaFin recently raised the so-called anti-cyclical capital buffer from zero to 0.75 percent, so that banks have to build up larger crisis buffers again.

In addition, a special systemic risk buffer for real estate loans of two percent is to be introduced.

In its report, the Bundesbank cited calculations by the Association of German Pfandbrief Banks (vdp).

According to this, in 2021 the prices for residential real estate increased by a total of 11.3 percent.

Other parameters have also increased significantly.

According to the Bundesbank, all indicators showed the highest price increases since the beginning of the recent upswing on the housing market.

Wage pressure increases

In times of increased inflation, the Bundesbank expects employees to take a bigger sip from the wage bottle.

"In this year's small collective bargaining round for around eight million employees, the favorable macroeconomic prospects, increasing labor market shortages and high inflation rates could contribute to noticeably stronger wage agreements," says the monthly report of the German central bank published on Monday.

According to the Bundesbank's economists, the planned increase in the statutory minimum wage to twelve euros from October is also likely to increase overall wage pressure.

This political intervention in wage setting would noticeably increase earnings in the lower pay groups and also have a noticeable impact on the segments above.

This should increase the upward pressure.

If one takes the historical relationships as a basis, the macroeconomic effects are "probably manageable".

However, in the current environment of very high inflation rates, it cannot be ruled out that wages will be passed on to prices to a greater extent.