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Political Uncertainty Causes a Blip in the German Real Estate Market 29-Nov-2017


 Are you looking to sell your apartment in Germany fast? Germany is generally the most stable country in the world, both politically and economically, but things in Germany have taken a turn for the worse in recent days.

Chancellor Angela Merkel fell short of majority in the recently called elections as the talks with other political parties to form a coalition government failed. This is the worst crisis of Chancellor Merkel’s 12 year tenure at the top, and it does seem likely that a new election will be called.

President Frank-Walter Steinmeier has tried hard to bring about a common meeting ground between the various political parties, but his efforts have proved to be unsuccessful so far. “The responsibility given to the parties remains,” said President Steinmeier, adding “One can’t just return that responsibility to the voters.”

But Chancellor Merkel insists that she will not step down from her position and would rather call a new election than head an unstable coalition. “Germany needs a stable government,” Mrs. Merkel said.

This has wide ranging consequences for the property market in Germany, which was just beginning to take off. But the uncertainty thrown in by the recent events have certainly not been appreciated.

Sudha David-Wilp, deputy director of the German Marshall Fund says in an interview with The Washington Post, “After Brexit and Trump, Germans are now facing the prospect of something out of the ordinary happening in their own country. Something that was beyond their borders is a spectacle that they will now have to deal with, too.”

Regardless, one does not expect too many problems for those who want to buy an apartment in Germany online. The residential property market has taken off in a big way, and there is no stopping that.

Indeed, according to according to Deutsche Bank AG, apartment prices in Germany have shot up by 60 percent in just 7 years. Homes in Germany increased in value by as much as 30% in just the last couple of years.

There are some who wonder if there is a real estate bubble in Germany. Michael Voigtlaender of the Cologne Institute for Economic Research says in an interview with Bloomberg News, “Rising prices on their own aren’t enough to create a bubble -- you have to look at the fundamentals. We have a stable mortgage market with steady equity ratios, and fairly moderate levels of home construction.”

What’ makes homeowners in Germany different from those in the rest of the world is that they don’t speculate in property. They are not the sort who makes money from flipping apartments. “Hardly anyone buys an apartment with the expectation that they’ll be able to sell it soon afterward for a lot more money,” explains Matthias Pink of Savills Plc.

So you don’t have the same type of uncertainly in the real estate market here as you see in Spain or Italy, even when there is uncertainty over the government. That is one reason why the recent political situation in Germany is nothing but a blip. The residential property market here will be able to get over that quickly enough.