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davidg

Is Germany Heading For A Housing Bubble?

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Compared to pretty much any other western country they were cheap, so I'm not surprised that's where the money is now going.

The difference is, I expect the government will step in some point much sooner than anywhere else did.

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A German housing bubble is the corollary of not being able to recycle their surpluses into the PIGS.

Twas inevitable, as I've said for the last 3 years.

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About 5% a year, in a country with growing disposable income.

Theyve bugger all wage inflation and are a nation reliant on forcing bankrupt nations into repaying their banks to keep the German Euro going as it enables them to have a relatively weak currency, by keeping weak/poor nation in it.

Edited by Corruption

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This story on Zero hedge jumped out at me- German local government in crisis?


I have warned that about 50% of the German municipalities are on the verge of bankruptcy. The pensions have been unfunded and are absorbing everything. As we saw in Detroit with more than 50% of current revenue going to pensions, taxes either rise, the borrow more, or they are out of business. We are in a giant bull market for taxes increases on every level. This is the real downside of Marxism – they theory that just keeps taking.

The German municipalities currently need more than 100 billion euros to renovate their dilapidated infrastructure.

http://www.zerohedge.com/news/2014-07-12/forget-puerto-rico-german-munis-are-trouble

Maybe a nice little housing bubble is exactly what they need?

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Housing bubbles rely on accelerating credit or debt.

Germans don't do credit or debt.

If their houses are going up its because there economy and wages growing.

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Well EMU has just about held together thus far....but may be the housing market can finally prove its undoing. How do you reconcile ZIRP on a vibrant German economy with tight housing supply to empty brutalist concrete properties in an arid Portugese wilderness with the nearest employment fifty miles away.

Edited by crashmonitor

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Housing bubbles rely on accelerating credit or debt.

Germans don't do credit or debt.

If their houses are going up its because there economy and wages growing.

They're in a fixed currency exchange with countries who cannot out-compete them.

Thus it ain't possible not to generate surpluses relative to those countries.

Since they are unable to raise their exchange rate relative the rest of the EZ they can either recycle those surpluses back into the rest of the EZ (didn't work out too well last time around) or invest them domestically (increasing the problem) or inflate their domestic economy via wage increases / house prices.

There aren't any other possibilities if they remain in the EZ.

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They're in a fixed currency exchange with countries who cannot out-compete them.

Thus it ain't possible not to generate surpluses relative to those countries.

Since they are unable to raise their exchange rate relative the rest of the EZ they can either recycle those surpluses back into the rest of the EZ (didn't work out too well last time around) or invest them domestically (increasing the problem) or inflate their domestic economy via wage increases / house prices.

There aren't any other possibilities if they remain in the EZ.

Yes this is correct.

The weird thing about Germany is prices look cheap in isolation but look expense vs rental costs i.e. yields are very low!

A colleague of mine just flogged a 3 bed flat he has owned for 20 years in a middle class neighborhood of Dusseldorf on a 2% yield....."how can I not sell it on a 2% yield?"

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