Bundesbank keeps faith in German economy, property market

Latest rise in infections was likely to chiefly hurt the hospitality sector

  
The Frankfurt skyline is seen from the meeting room of the European Central Bank (ECB) council meeting room on the 41st floor at the construction site of the new headquarters of the ECB during a guided media tour in Frankfurt, October 31, 2013.

The Frankfurt skyline is seen from the meeting room of the European Central Bank (ECB) council meeting room on the 41st floor at the construction site of the new headquarters of the ECB during a guided media tour in Frankfurt, October 31, 2013.

REUTERS/Kai Pfaffenbach

FRANKFURT - The German economy is likely still growing, albeit more slowly, and the country's property market is holding up well despite the latest resurgence of the coronavirus pandemic, the Bundesbank said on Monday.

The German central bank said Europe's largest economy was slowing but the latest rise in infections was likely to chiefly hurt the hospitality sector.

"The recent, strong increase in infection numbers and the associated containment measures taken in some regions may hurt mostly the service sectors and the hotel and catering industries," the Bundesbank said in its monthly report.

"From today's standpoint, the German economy could be extending its recovery in the current quarter, albeit at a noticeably lower pace."

It also noted that the pandemic had hardly affected the property market and this trend could continue as long as the economic hit from the pandemic remains temporary.

"An abrupt correction in property prices is not in the offing as long as there is no severe disruption to the current economic recovery," Bundesbank said.

In the report, the Bundesbank also published an in-depth study on the country's real estate market, where residential property prices have risen by 50% since 2010.

It concluded that the boom can be explained to a large extent by increased demand in relation to supply and, despite sizeable overvaluations in urban area, it saw no evidence of "destabilising, purely speculative motives".

(Reporting By Francesco Canepa; Editing by Toby Chopra) ((@FranCanJourno francesco.canepa@thomsonreuters.com; 004906975651247; Reuters Messaging: francesco.canepa.thomsonreuters.com@reuters.net))

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