A Novel Housing Price Misalignment Indicator for Germany

From 2014 until present, housing prices in Germany have been rising faster than consumer prices in all quarters except one, raising concerns about an excessive overheating of the housing market. To assess the vulnerability of the German housing market to a future realignment of prices or even a housing bust, this paper develops a housing price misalignment indicator that is composed of seven indicators, which are commonly associated with the fundamental value of residential property. An empirical application to the most recent data suggests that the German housing market exhibits an overvaluation of approximately 11%, where interest rate risk and a relatively advanced stage of the housing cycle are identified as the main factors fueling these imbalances, while a rather solid debt-servicing capacity mitigates these imbalances since end-2009.

A look into German housing markets: A bubble call?

The steep rise in German house prices in recent years raises the question of whether a speculative bubble has already emerged. Using a modified present-value model, we estimate the size of speculative house price bubbles in the German housing market. We do not find evidence for positive bubble accumulation in recent years, and interpret the current bullish run as reflecting the correction of house prices that have been undervalued for more than 10 years. With house prices close to their fair values as of 2018:Q1, our answer to the question is, ‘Not yet, but it is likely soon’.

Ethnic Discrimination in the German Housing Market

Ethnic discrimination in the housing market has long been seen as a cause of residential segregation and social inequality. While research has investigated the existence and extent of discrimination with regard to written applications for housing, little is known about personal inquiries via telephone. This study reports on findings from a telephone audit study that has allowed us to estimate the impact of (ethnic) accents and to distinguish between taste-based and statistical discrimination. We find no significant discrimination against callers with Turkish names. However, callers with both a Turkish name and accent were invited to view apartments significantly less often. Information about steady employment compensated for this disadvantage to a large extent. We conclude that statistical discrimination plays a major role in explaining why persons of Turkish origin receive fewer invitations to view apartments.