German Home Prices Show Signs of Overheating, Government Says

German home prices in cities including Hamburg and Munich may be overheating, according to a government letter seen by Bloomberg.

Values in some parts of the cities have risen significantly, Deputy Finance Minister Hartmut Koschyk said in a written response to questions by Gerhard Schick, a parliament member for the opposition Green Party.

“In some local segments of these cities, there may possibly be some first signs of overshooting,” said the letter addressed to Norbert Lammert, president of the Bundestag.

The German real estate market has been one of the biggest beneficiaries of the European credit crisis, as investors are drawn by the country’s growing economy and low interest rates. Prices of apartments in Hamburg and Munich jumped 22.5 percent in the last two years, according to data compiled by Berlin- based online brokerage Immobilien Scout 24. Prices nationwide rose 9.3 percent in that period.

In Germany as a whole, home-price increases and mortgage lending growth has been moderate and a bubble is far from developing, Koschyk’s letter said. Price gains so far don’t threaten the stability of the financial system, it said.

Koschyk sent the letter, dated June 4, on behalf of the German government in response to questions from Schick. Its contents were first reported by German newspaper Die Zeit on June 20. An official at the Finance Ministry declined to comment on the letter’s content.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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