Homes in large German cities are between 15-30% overpriced, the Deutsche Bundesbank said, in a message that is likely to stoke further fears in Europe’s strongest economy about the side-effects of monetary stimulus, Reuters reported. The German economy will stay on a strong footing in the coming months thanks to high industrial and construction activity, the central bank said, but it warned this could not fully account for the surge in residential property prices. “According to current estimates, there were price overshoots of between 15 and 30% in the cities last year,” the German central bank said in its monthly report. “The deviations in prices were particularly pronounced in the case of owner-occupied apartments in the big cities.” Germans have been skeptical of the European Central Bank’s policy mix of sub-zero rates and aggressive bond purchases, fearing it would eat into returns on their savings and inflate a property bubble.
