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POLL-German property price rally slows but cheap to make it work


Band Zuzanna Szymanska and Jonathan Cable

BERLIN/LONDON, March 3 (Reuters)House prices in Germany’s booming property market are set to rise sharply again in 2022 and, while the pace will ease in coming years, increases will still outpace headline inflation, according to a Reuters poll.

As in much of the world, many Germans have spent most of the coronavirus pandemic working from home and those who could afford to move have sought larger and more expensive properties, fueling rising house prices. .

Years of ultra-low borrowing costs have also made it less expensive for people to expand or for first-time buyers to get on the property ladder.

Historically, the German housing market was dominated by renters, but the desire for a safe haven investment, as well as speculators, have increased in recent years, adding to the boom in the property market.

Isabel Schnabel, a member of the board of the European Central Bank, said in February that the bank should take into account soaring house prices when assessing inflation.

Much of the polling was conducted before Russia invaded Ukraine, which could delay – or limit – any ECB consideration of tighter monetary policy. This in turn could support the housing market in the short term.

House prices rose about 10% last year and are expected to rise 6.3% this year, according to the Reuters poll from February 10 to March 2 of 16 real estate market experts. This pace is expected to slow to 4.5% next year and then to 2.8% in 2024.

INFLATION

Yet consumer price inflation was pegged at 3.0%, 1.8% and 1.9%, respectively, in a January Reuters poll and the latest house price forecasts were an update. day compared to the respective 6.0%, 4.0% and 2.0% given in November. ECILT/EU

“House prices will continue to rise, albeit at a somewhat slower pace than in previous years,” said Carsten Brzeski, global head of macro at ING.

“Both the mismatch between supply and demand, currently fueled by a stagnant supply, as well as the high costs of materials and construction and the fight against climate change, for which energy efficient housing plays a major role, will continue to drive up house prices for years to come.”

Germany should rein in soaring house prices by setting caps on mortgages and forcing banks to build up more capital, the Union’s financial stability watchdog said last month. European.

“The house price-to-income ratio is still higher than during the housing boom of the 1990s, especially in big cities,” said Marco Wagner, senior economist at Commerzbank.

Asked to rate the affordability of German property prices on a scale of 1 to 10 where 1 was extremely cheap and 10 extremely expensive, analysts rated them 8. This matched the previous estimate and one of the highest medians given compared to other Reuters polls for major housing markets.

Respondents to an additional question said the ECB would need to raise its refinancing rate to 1.50% this year to slow activity significantly. It currently sits at zero and only 13 of 43 economists in a separate Reuters poll of ECB policy have seen it rise at all this year.

“To significantly slow activity, a sharp rise in interest rates is needed, which is not to be expected at this point,” said Pekka Sagner, economist for housing policy and real estate economics at the German Economic Institute.

(Reporting by Jonathan Cable in London and Zuzanna Szymanska in Berlin; Additional reporting and polling by Swathi Nair and Susobhan Sarkar in Bengaluru; Editing by Ross Finley and Gareth Jones)

((jonathan.cable@thomsonreuters.com; +44 20 7513 4029;))

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