[rexgallorum2]

Years ago I had an elderly neighbour here in Germany who fell victim to financial fraud, wiring most of his his life savings--over $200k--to some dodgy bank account in Hong Kong. He thought he was buying shares in some kind of gold mine or something. He asked me for help because most of the information he had was in English. I quickly figured out that he'd been scammed, and very gently broke the news to him. He took it remarkably well.

This happened during the Euro crisis some years ago, and at the time it seemed that Germans with any kind of savings were desperately looking for safe places to put it. Lacking much in the way of financial literacy, many undoubtedly fell victim to professional crooks.

It's hardly any surprise that property markets across Germany started heating up around that time. Property is widely viewed as a safe bet. They call it 'Betongold' or 'concrete gold' for a reason. I know that isn't the only factor behind the vast increase in property values in many areas, but it's undoubtedly a major one, and I think we can expect this situation with interest rates to further inflate what is beginning to look like a bubble.

Nominal property values in the mid-sized city where I live have more than doubled in a decade--seems like a wild party after decades of relatively flat (real) property values.

It's something of a shock, given that earnings have hardly budged during the same period. One could argue that Germany was abnormally cheap 10 years ago in terms of both consumer goods and real estate, and it might be true, but the reality on the ground is pretty disheartening, particularly in light of political developments in places such as Saxony. I'm afraid the squeeze on people in the middle is going to fuel more political instability, or could at the very least be used to stir up trouble.