The Bundesbank sees a slowdown in the real estate market, but not a correction

Germany's central bank sees a slowdown in the real estate market, but no significant correction is imminent

Germany’s central bank predicts a slowdown but not a significant correction in the country’s housing market despite warnings of overvaluation, according to a report published on Thursday.

Claudia Buch, vice president of the Bundesbank, told CNBC’s Joumanna Bercetche: “We are seeing a slowdown in residential property price growth, but it is not that the overall dynamics have reversed.”

“So we’re still overvalued in the market,” she said.

Some analysts, including Deutsche Bank, have forecast a sharp decline for the sector. House prices have already fallen about 5% since March, according to Deutsche Bank, and will fall between 20% and 25% overall from peak to trough, predicted Jochen Moebert, a macroeconomic analyst at the German lender.

Buch said the central bank’s concern was the extent to which the overvaluation was caused by the loosening of credit standards by the very rapid growth in residential mortgage lending.

“We’re seeing a slowdown there as well,” she said. “So right now we don’t think that additional measures are being taken to slow the build-up of vulnerabilities in this segment of the market, but we do think that we should continue to monitor the market because we know that private households are very exposed to mortgages.” loans, so it is the largest component of private household debt.”

The German market has a high proportion of fixed-rate mortgages, so households are less vulnerable to rising interest rates than in some other countries, she continued.

“Of course the risk does not disappear, it is still in the system, but this exposure to the risk of interest rates is largely in the financial sector, the banks that lent it in terms of mortgages.”

The Bundesbank’s 2022 Financial Stability Review highlights other issues, including worsening macroeconomic conditions and a slowdown in German economic activity, rising energy prices and falling real disposable income.

He describes the German economy as a “turning point” after price corrections in the financial markets, which led to the write-down of securities portfolios. It also cites increased collateral requirements in futures markets and increased corporate credit risks.

It said there had so far been no fundamental reassessment of credit risk at German banks, but said their financial system was “vulnerable to adverse developments”.

“The message is very clear, we need a resilient financial system, we need to continue to build resilience going forward,” Buch told CNBC.

Extra Hannah Ward-Glenton reports

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *