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watch nowVIDEO9:3309:33German central bank sees property market slowdown but no significant correction aheadSquawk Box Europe

Germany's central bank is predicting a slowdown but no significant correction in the country's property market despite warnings of overvaluation, according to a report published Thursday.

Claudia Buch, vice president of the Bundesbank, told CNBC's Joumanna Bercetche: "We do see a slowdown in the price growth for residential real estate, but it's not that the overall dynamic has reversed."

"So we still have overvaluations in the market," she said.

Some analysts, including at Deutsche Bank, have forecast a sharp decline for the sector. House prices have already declined around 5% since March, according to Deutsche Bank data, and they will drop between 20% and 25% in total from peak to trough, forecasts Jochen Moebert, a macroeconomic analyst at the German lender.

Buch said the central bank's concern was the extent to which overvaluation was being driven by the loosening of credit standards by a very fast growth in credit residential mortgages.

"There we also see a slowdown," she said. "So we don't currently think that additional measures are taken to slow down the build-up of vulnerabilities in this market segment, but we do think we need to keep monitoring the market because we know that private households are very much exposed to mortgage loans, so that's the biggest component in private household debt."

The German market has a high share of fixed-rate mortgages so households are less vulnerable to rising interest rates than in some other countries, she continued.

"Of course the risk doesn't disappear, it's still in the system, but this exposure to interest rate risk is largely with the financial sector, the banks who've done that lending with regard to mortgages."

The Bundesbank's Financial Stability Review for 2022 highlights other issues, including deteriorating macroeconomic conditions and the slowdown in economic activity, increases in energy prices and the fall in real disposable income.

It describes the German economy as at a "turning point" following price corrections in financial markets, which have led to write-downs on securities portfolios, increased collateral requirements in futures markets and increased risks from corporate loans.

It says there has been no fundamental reassessment of credit risk in German banks so far but says its financial system is "vulnerable to adverse developments."

"The message is very clear, we need a resilient financial system, we need to keep building up resilience over the next period of time," Buch told CNBC.

Additional reporting by Hannah Ward-Glenton


News Source: CNBC

Tags: financial system property market we need to keep households vulnerable interest rate deutsche bank according central bank slowdown

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How Jacob deGrom contract could affect Aaron Judge deal, especially with Giants

The Texas Rangers backed up a brinks truck for Jacob deGrom. What does this mean for Aaron Judge’s market, especially with the Giants?

Just two years ago, MLB owners cried poor, bringing the free-agent market to a halt. These days, matters are far different.

On Friday night, the Texas Rangers signed 34-year-old Jacob deGrom to a five-year, $185 million contract that could increase in value with various incentives. deGrom, forever an injury risk, signed that record offer in record timing, thus leaving his previous team, the New York Mets, metaphorically in the dust.

If deGrom can secure that kind of contract, what does it say about Aaron Judge’s market? Judge entered the offseason as the near-universal best player available. If a desperate team was willing to pay a 34-yr-old who has hardly played the last 2 yrs and exudes no leadership skills 5/$185M, what might a desperate team (SFG) pay a 30 yr old leader (Judge) who has been healthy and excelled the last 2 yrs?

— Joel Sherman (@Joelsherman1) December 3, 2022

Giants: Aaron Judge’s market price just went up

The Yankees remain favored to bring Judge back into the fold. In order to change his mind, the two advantages the San Francisco Giants have is familiarity (Judge grew up in northern California) and money.

New York already made Judge an offer for seven years and $300 million. It was an astounding contract that Judge likely would’ve signed last offseason. Unfortunately for the Yankees, Judge is well aware of his value after an AL MVP campaign in which he broke Roger Maris’ home run record.

That awareness went way up on Friday, with an older, oft-injured deGrom signing a larger AAV than most expected. The Mets offer was reportedly for three years at $40 million AAV. The contract deGrom ended up signing was for more years, and a great annual value.

On paper, Judge should be worth more than deGrom. But this offseason in particular, pitching seems to be at a premium. Even prior to deGrom, back-end rotation pitchers were going for $10 million a pop (see Boyd, Matthew). It’s no wonder that deGrom, a true ace and arguably the best pitcher of his era when healthy, went for far more than expected.

It remains to be seen if that increase is pitching-specific, or market wide. If it’s the latter, you can bet Judge will use that to his advantage.

Next: One team is surprisingly unheard from in the Aaron Judge sweepstakes

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