empirica Housing Market Bubble

The empirica Housing Market Bubble Index provides a relative risk assessment of the regional housing markets. It is based on the analysis of increases in various indicators and not on the exceeding of absolute threshold values due to the specific local characteristics.

The explosive nature of the bubble risk is currently shrinking because rents are rising faster than purchase prices: Potential price setbacks are therefore becoming smaller and smaller. The spread, on the other hand, is stagnating: The number of threatened districts therefore remains high. In the top 7 cities, price growth in the second quarter of 2024 is only 29% ahead of rental growth. This was last the case in Q3/17; in the first quarter of 2022, it was still 49%.

empirica Housing Market Bubble Index

Purchase Options

Are you interested in the empirica Housing Market Bubble Index? You can obtain the data at district level from empirica regio as access to the empirica regional database (Market Studio  and RESTful API ). In addition to access to the housing market bubble index, you benefit from a wide range of other data. You also get immediate access to the updated index as soon as it is published.

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If you are interested in a consultation appointment or an individual offer to obtain the empirica housing market bubble index, please contact us by e-mail at info@empirica-regio.de  or under +49 (0) 228 914 89 214.

Methodology

A bubble is a speculative price increase that can no longer be justified by the fundamental relationship between supply and demand. However, it is not so much the high prices themselves that are harmful, but rather the resulting exaggerated scarcity. This leads to misallocations: housing construction and the lending required for it are boosted excessively, and capital for alternative investments becomes scarce. However, a bubble only becomes dangerous when it bursts. Assets are then destroyed because the book values of the properties lose value. Vacancies arise and, in the worst case, a banking crisis occurs because loan defaults get out of hand.

The bubble index can only indicate the threat of a bubble forming and display various warning levels. For the calculation, the three individual indicators - multiplier, price income and construction activity - are monitored on a quarterly basis. The (regional) risk of a property bubble increases if the corresponding comparative values from 2005 or the demand forecast are significantly exceeded. The year 2005 represents a normal phase in which nobody suspected a price bubble and the market was slightly undervalued.

Detailed results and further information on the methodology can be downloaded from the empirica ag website:

empirica (2024): empirica Housing Market Bubble 2/2024  (external download in German only).



housing market bubble
Housing bubble index Q2/2024: Distribution stagnates, but urgency continues to fall

Housing bubble index Q2/2024: Distribution stagnates, but urgency continues to fall

The current sharp rise in rents contrasts with the moderate increase in purchase prices. This is positive for the risk of a bubble, as the high valuation level of property is increasingly justified. At the same time, the slight fall in interest rates is leading to an increase in new lending for residential construction, which in turn harbours the potential for further price rises and thus increases the risk of a bubble.
Housing bubble index Q3/2023: Fewer and fewer regions at risk

Housing bubble index Q3/2023: Fewer and fewer regions at risk

The empirica housing bubble index indicates that the risk of a housing market bubble in Germany is decreasing. In recent quarters, there has been a change: there are fewer and fewer vulnerable districts. The danger is still there, but its extent is getting smaller. The number of endangered regions has been falling for three quarters in a row.
empirica housing market bubble index Q3/2021: Index continues to rise

empirica housing market bubble index Q3/2021: Index continues to rise

The empirica housing market bubble index rises more strongly in the third quarter of 2021, especially in the completions sub-index, and somewhat less in the multiplier and price-income sub-indices. The overall index rises most strongly in the swarm cities, followed by the growth and shrinking regions.