Those thrifty Teutonic realists would never be stupid enough to have a housing bubble, would they?
Well, actually they did following reunification in 1990, with the usual terrible results. Since 1994, housing prices have dropped as much as 30% in places like Berlin. The main reason it didn’t turn into a catastrophe was that the rest of the world wasn’t having a global economic crisis.
It was only around 2005 (Germany’s own lost decade) that things finally started to improve in Germany, but the memories of the housing bust kept things under control.
I don’t really buy Edward Hugh’s argument that it must have been demographics, (in addition to the other rather obvious point that young Spaniards don’t make anywhere near enough money to have been responsible for pushing up the real estate in Spain). Black money and massive over-investment by stupid British and Irish pensioners (and the property developers who scammed them) are more likely to blame.
Strangely enough, the Germans, who were one of the first foreign buyers of Spanish real estate mostly sat out 2005-2008, and are now back, bottom-fishing for deals.
There’s a fair amount of research showing how an economic depression can turn people into savers for the rest of their lives, which is probably what happened in Germany. There’s a similar pattern among people that grew up during the great depression, who saved much more money than their baby boom children.
The overall lesson is that if you are going to have a real estate bubble, try not to have it pop just as the world goes into a massive economic crisis.