Real estate prices in Germany have risen sharply since the beginning of the decade. But the boom is very different from the real estate bubbles that led to serious macroeconomic crises in the US, Spain and Ireland. Apart from the fact that German households have low debt levels, the moderate weight of the construction sector in particular indicates that even the bursting of a price bubble would not lead to severe macroeconomic problems. For example, construction investment accounts for only one tenth of Germany’s gross domestic product today, whereas a full one fifth of economic output depended on it in Ireland and Spain before the crises.

Germany’s real estate boom: Is this time different?(PDF, 158 KB, non-accessible)