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US News: Bundesbank warns against risks on German real estate market

The expenses constrained represent 35% of the French budget on average

 The expenses constrained represent 35% of the French budget on average © Philippe Renault / West France a study was interested in the expenses constrained of the French. These represent an average of 35% of their budget. Photo Stock Illustration. According to a recent study on the French budget, the expenses constrained represent € 1,059 on average, or 35% of the average net income of citizens. Strong financial differences exist depending on the socio-professional category or the region taken into account.

The Bundesbank sees the prices for houses and apartments in Germany with increasing concerns.

Die Bundesbank sieht die gestiegenen Immobilienpreise in Deutschland mit Sorge. © Jens Kalaene / dpa central picture / dpa The Bundesbank sees the increased real estate prices in Germany with concern.

"According to our calculations, residential real estate prices are 10 to 30 percent above the value justified by fundamental data. We are increasingly seeing outside the metropolitan areas, "said Bundesbank Vice President Claudia book in the presentation of the financial stability report of the Deutsche Bundesbank on Thursday in Frankfurt.

«Critical for financial stability can be rising real estate prices, if increasingly lending with strongly relaxed award standards awarded and rising prices are expected," led book. About half of the bank loans for residential real estate have an interest rate period of more than ten years.

Experts: Abolish tax benefits for real estate owners

 Experts: Abolish tax benefits for real estate owners Three renowned scientists demand the abolition of the tax privileges for real estate ownership. © Robert Günther / DPA-TMN Three renowned scientists are looking to abolish tax privileges for real estate owners. Investments in real estate would be massively favored in Germany for decades, criticize Ifo-President Clemens Fuest, the boss of the University of Cologne, Johanna Hey, and the Mannheim Economist Christoph Spengel.

«A high proportion of long-running loans and investments makes the German financial system vulnerable to interest rate risks," explained the Bundesbank. Book warned: "Risks from real estate financing must be limited.» The European Central Bank (ECB) also recently warned in its financial status report before increasing risks on real estate markets.

Assessment of the Financial System While Corona

Overall, the German financial system worked well during the Corona pandemic, the Bundesbank accounted well. The feared bankruptcy in the corporate sector remained. Sign that actually non-surviving companies with state aid levels are artificially kept artificial life, the central bank currently does not see. "We do not see any evidence that we get a zombification," said book. But you have to observe the location in the corporate sector very closely. "We certainly do not want to come into a situation that we carry up insolvencies."

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Overall, the extensive state measures would have protected the financial sector before losses, constant book. "But there are further vulnerabilities to negative macroeconomic developments and especially in the real estate market," affirmed the Bundesbank Vice President.

The Bundesbank Management Board Joachim Wuermeling, which is responsible for banking supervision, stated: "The German financial system is currently sufficiently resistant to cope with a braked economic development." Banks could use the capital buffers built up to prevent a possible restriction of lending. At the same time, Wuermeling warned, money houses would have to be warm in the event of a change in the interest rate environment.

Possible setbacks

book said: "The risk of a medium-term inflation has increased." If the increase in the inflation rate is significantly stronger or longer than expected, the interest on the financial markets could "noticeably increase", explained book. "That would result in market corrections and price losses. That would meet the banks directly. " For banks, it would get more expensive to get fresh money, but the yields would rise slowly. Book stressed: "Now is the right time for prevention compared to future risks."

In order to prepare banks even better on possible setbacks, the Bundesbank expresses itself to rebuild the so-called anti-cyclic capital buffer. This buffer had been increased to 0.25 percent in 2019, but at the beginning of the pandemic, the overseers had reduced him to zero percent on April 1st of April last year. In principle, this additional capital buffer should increase the resilience of banks in times of crisis. But everything that the institutes are in equity in the precaution is missing in the current business.

China's real estate giant Evergrande warns before payment default .
The highly indebted Chinese real estate giant Evergrande has warned about possible payment difficulties. © NG Han Guan / AP / DPA Evergrande is considered the world's highest indulgent real estate company. After a review of the funding, no guarantee can be given that the Group has sufficient resources to comply with its financial obligations, the company shared.

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