German property: Euro angst hits home COULD Germany be heading for a property bubble? In 2009, after a decade of stagnation during which many other countries experienced a dramatic real-estate boom and bust, German house prices slowly began to rise. Then, for a while, house prices and wages leap-frogged each other in a reasonably healthy way. But now bubble-watchers see some danger signs. Prices in big cities - notably Berlin, Munich, Hamburg and Cologne - seem to be getting out of hand (see chart). In Germany's seven biggest cities prices for residential property grew by 9% in 2011, with another increase of 11% expected this year. Desirable districts in Berlin and Munich have seen even higher mark-ups. Although low interest rates play a role, the euro-zone crisis seems to be the bigger factor. Not only are rich Germans putting more of their wealth into fixed assets, but foreigners see German cities as a safe haven. The biggest buyers are Russians and Luxembourg funds, reports the Bundesbank. For some investors "euro angst trumps bubble angst," writes Reiner Braun of Empirica, a property consultancy. Most analysts, including those at the Bundesbank, see the chances of a full-blown bubble as small. Yet in its financial-stability report published on November 14th, Germany's central bank discusses the tools it could use to cool an overheating market: for instance, limiting loans to a certain percentage of the property's value. But some worried souls are warning of a structural weakness in the German mortgage market. Rates tend to be fixed for the first ten years, after which borrowers have to renegotiate their loan. A rise in interest rates could put many in difficulty. On the lender side, many banks use short-term deposits to finance these loans. A rate rise could make many of their fixed-rate loans unprofitable. Regulators seem unworried by the maturity mismatch. But mortgages account for up to 50% of many small banks" portfolios. A bubble could spell trouble for a big chunk of Germany's banking sector, says Hans-Joachim Dübel, a housing-finance expert. He fears a German version of America's savings-and-loan crisis of the late 1980s.