Germany’s housing market continues to grow even stronger after five years of robust house price rises. Decade-long economic growth, more than 1 million refugees, high work-related immigration, record-low unemployment, weak construction supply and low interest rates has cause this significant shift in a country where the housing market has historically been extraordinarily stable.
The German housing market was one of the few that avoided a slump in the wake of the 2008-2009 global financial crises. And now, it seems that it is poised to escape again the fallout from the COVID-19 pandemic. Extremely low interest rates and bond yields have encouraged persistently growing demand, despite the fact that most German mortgage borrowers borrow on long-term interest rates, which are higher than “tracker” rates. Low construction activity is another reason for the continued increase in house prices.
But unlike the housing market, the overall German economy is now in recession. even before the coronavirus pandemic, Europe’s biggest economy was already slowing. In 2019, the economy grew by a minuscule 0.6%, its weakest performance since 2013, amidst slowing domestic car industry and weak goods exports due to global trade tensions.