The starting point for this thesis and the associated question were price developments observable on the residential property market as well as increased media reporting. Against this background, the following question was examined with scientific methods within the framework of this thesis: Is a bubble formation recognisable in the German residential real estate market and what regional differences can be identified in answering this question?
As a first step, price-influencing factors were examined in more detail and the price development relative to annual rent ratio, income and construction costs was examined. In addition, the effect of the ECB's interest rate policy and the interplay between property prices, monetary policy and asset price inflation were analysed. Hereby it became apparent that the significant price increase for residential property since 2010, and especially accelerated since 2016, can be explained against the backdrop of the extremely low interest rate level and the considerable expansion of money supply.
In order to be able to identify price bubbles on the residential property market in a measurable and comprehensible way, the price development was analysed in a second step with the mathematical procedure according to Diba and Grossmann, which uses the Augmented Dickey Fuller Test. The procedure is based on the premise that the price of a good is related to its fundamental value. To examine the price development in the residential property market, the fundamental value used for comparison purposes is derived from the development of the rent price index, the index of average gross monthly earnings and the construction cost index. The house price index was used as a price indicator for residential property. With the help of the Augmented-Dickey-Fuller Test, the development of the various indices was examined and compared with regard to their degree of stationarity. This investigation was carried out for the overall German residential real estate market in the observation period 2010-2021 in order to obtain an up-to-date picture. For the period under consideration from 01.01.2010 to 31.12.2021, a price bubble was not confirmed on the overall German residential property market.
Inhaltsverzeichnis (Table of Contents)
- 1. Introduction
- 1.1 Problem statement.
- 1.2 Objectives and structure of the work
- 2. Definition and theoretical basis of asset price bubbles
- 2.1 Asset price bubbles as recurring phenomena of the financial markets.
- 2.1.1 Historical financial crises...
- 2.1.2 Structure of financial crises
- 2.1.3 Price bubbles as triggers of financial crises.
- 2.2 Characteristics of price bubbles
- 2.2.1 Definition of price bubbles
- 2.2.2 Critical delimitation of the definition of the term.
- 2.2.3 Short-term effects on national economies
- 2.2.4 Long-term effects on national economies.
- 3. Price bubbles on real estate markets.
- 3.1 Real estate markets in the context of economics.
- 3.1.1 Uniqueness of the residential property market
- 3.1.2 Segmentation into product submarkets.
- 3.1.3 Segmentation into spatial submarkets...........
- 3.2 Characteristics of price bubbles in real estate markets
- 3.2.1 Long duration...........
- 3.2.2 Special behaviour of market participants.......
- 3.2.3 Locality.
- 3.3 Explanatory approaches for a bubble in the residential property market....
- 3.3.1 Interest rate policy
- 3.3.2 Interaction of property price - monetary policy - asset price inflation
- 3.3.3 Economic effects of interest rate changes on mortgage loans
- 3.4 Current market indicators of a possible price bubble on the German residential property market
- 4. Empirical approaches to the detection of price bubbles....
- 4.1 Price to Rent Ratio.
- 4.2 Price to Income Ratio..
- 4.3 Price to Production Cost Ratio.
- 4.4 Summary of the findings
- 5. Empirical analysis of the German residential real estate market using the Diba and Grossmann method.
- 5.1 Empirical approach
- 5.2 Methodical preparation
- 5.3 Data basis and preparation of the data
- 5.4 Evaluation of the database for the overall German market…....
- 5.4.1 House price index .......
- 5.4.2 Index of net cold rents
- 5.4.3 Index of average gross monthly earnings .
- 5.4.4 Construction cost index
- 5.5 Evaluation of the database subdivided according to district types
- 5.5.1 House price index by district type
- 5.5.2 Index of net cold rents by district type
- 5.6 Summary of the results..
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This master's thesis aims to investigate the presence of a real estate bubble in the German residential property market. The analysis focuses on identifying key indicators and applying econometric methods to determine whether current market conditions suggest the formation of a bubble. This study uses both theoretical frameworks and empirical data to analyze the German real estate market.
- Definition and Characteristics of Asset Price Bubbles
- Analysis of Real Estate Market Dynamics
- Empirical Evidence of Potential Bubble Formation
- Econometric Analysis of Market Indicators
- Evaluation of the German Residential Real Estate Market
Zusammenfassung der Kapitel (Chapter Summaries)
The first chapter introduces the research topic, outlining the problem statement and objectives. The second chapter delves into the theoretical framework of asset price bubbles, examining their historical context, characteristics, and economic implications. The third chapter explores the specific characteristics of price bubbles in real estate markets and examines explanatory approaches for bubble formation. The fourth chapter discusses empirical approaches to detecting price bubbles, focusing on indicators like the price-to-rent ratio, price-to-income ratio, and price-to-production cost ratio. The fifth chapter presents an empirical analysis of the German residential real estate market, using the Diba and Grossmann method to examine data and identify potential bubble formations.
Schlüsselwörter (Keywords)
The core concepts of this thesis revolve around the German residential real estate market and the potential presence of a bubble. Key themes include asset price bubbles, real estate market dynamics, econometric analysis, price-to-rent ratio, price-to-income ratio, price-to-production cost ratio, and the Diba and Grossmann method. The research focuses on analyzing market indicators, identifying potential bubble formations, and evaluating the German real estate market.
- Quote paper
- Kilian Köberlein (Author), Real Estate Bubble in Germany. The German Residential Real Estate Market for the Presence of a Bubble, Munich, GRIN Verlag, https://www.grin.com/document/1268386
