FRANKFURT May 4 A combination of low interest
rates and banks hunting for yield could fuel a dangerous real
estate bubble in Germany, Bundesbank board member Andreas
Dombret warned on Wednesday, and he urged banks and financial
supervisors to be alert.
Housing prices in Germany - relatively cheap compared with
other European countries in the past - have risen sharply in
recent years, partly as record low European Central Bank rates
have encouraged households to take on debt.
Real estate prices in cities like Berlin, Hamburg, Munich or
Frankfurt have increased by more than 60 percent since 2010, the
Bundesbank estimates, reflecting solid growth, low unemployment
and low borrowing costs.
"The good news is that there is currently no real estate
bubble that threatens financial stability in Germany. But the
traffic light is clearly on yellow," Dombret told an conference
Some early warning indicators such as credit volumes and
easing credit standards point to banks willing to take on more
risk, he added.
"The mixture of booming real estate market and low interest
rates can become a dangerous cocktail for the banking and
savings bank sector," said Dombret, the Bundesbank's top bank
Banks and their supervisors - the ECB for the biggest banks,
the Bundesbank and federal watchdog BaFin for the smaller
lenders - should do everything to find out how big the risks are
and help to prevent the build-up of a bubble as early as
possible, Dombret added.
(Reporting by Andreas Framke; editing by Mark Heinrich)