What will happen to Germany's real estate market if interest rates rise now?
Will a bubble burst, as some fear?
So far there are no signs of this.
It is quite possible that prices will not rise as rapidly as in the past.
In the meantime, parts of the London real estate market had already pointed out that all prices that rise can also fall again at some point.
Investigations by the Bundesbank have also shown that the extremely low interest rates have also artificially driven up real estate prices in Germany.
If there is also a certain normalization of house price developments with the normalization of the ECB's monetary policy, that is good and reasonable.
When interest rates are higher, real estate is less affordable and investment alternatives become relatively more attractive;
both ensure that rising interest rates tend to slow down real estate price developments.
Nevertheless, houses and apartments remain in demand, especially in the hotly contested German metropolitan areas.
In any case, the market for residential real estate in Germany has proven to be relatively robust during the corona pandemic.
In addition, inflation also ensures that real estate does not become completely uninteresting as an investment.
And last but not least, despite the recent increase, interest rates are still low from a historical perspective;
right now they are even lower than inflation.
All this makes it rather unlikely that a large price drop is just around the corner.