How to nip German house price rises in the bud

6 May 2013 This is part of a Twitter exchange (reproduced below) with @Frances_Coppola and econgirl (@raluca3000) My comment that the beginnings of housing price escalation in some German cities should be ‘nipped in the bud’ met the response “how?”

I can’t reply in 140 characters so here is a longer one:

Surely a combination of some or all of the following should do it:

  • Strong government statements that dwelling prices will remain stable, at least in real terms, in the short and long run, with government doing all it can to ensure this.  (Better still if ECB would sign up too.)
  • Avoiding very easy credit for house purchase (either for occupation or for letting). If there is any case for easy credit it is for new construction and repair (which improve the size or quality of the stock).
  • Avoiding priviledges for housing in capital gains tax, inheritance tax, income tax
  • Some version of an annual tax on market value
  • Protecting the appeal of renting for households – protecting security of tenure, rent control, enforcing maintenance and safety standards
  • Stop privatising social housing stocks
  • Try to maintain the distinctive polycentric structure of Germany (its many strong cities) and take measures to stop Berlin getting out of hand (becoming a bit of a London)
  • Pay attention to the pension system, to ensure that people don’t pile their savings into housing as a way of making good perceived failings of their pensions.
  • Build more homes where they are needed (much of it by the state/public bodies).

There is nothing specific to Germany about this list, apart from the penultimate (correction) polycentricity/London point, and I’m not a special expert on Germany. These are suggestions deriving from theoretical reflection and common sense.  I would propose the same for the UK and Netherlands but it would be more of a U-turn in our cases.

tweetsGermanyThis last tweet from econgirl:  I don’t understand it.  Who is “we”? I personally am asking Germany (and everyone else in Europe) to increase spending (on consumption and especially investment). I’d also like to see wages go up in all these countries including Germany. What is a good place to do what?

Author: Editors


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