Berlin targets big landlords with rent freeze

Shares in German landlord Deutsche Wohnen have fallen by almost a fifth in two weeks following news that Berlin’s senate has approved a draft bill for a rent freeze.

952_MW_P26_Inv-Pro_Main

Berliners have been squeezed by sharp rent increases

The German capital is set to freeze rents for five years

Shares in German landlord Deutsche Wohnen (DW) have fallen by almost a fifth in two weeks following news that Berlin's senate has approved a draft bill for a rent freeze, or Mietendeckel, which means landlords will be blocked from putting up rent on residential properties for five years.

"If we don't want to end up like London, where even lawyers and doctors have to live with flatmates because they can't afford their own apartment, then we have to do something about it," Olaf Scholz, Germany's finance minister and vice chancellor, told newspaper Frankfurter Allgemeine Zeitung.

Germany is a country of renters. However, monthly rents in Berlin, where 85% of people rent, have gone up by 103% since 2008. This is largely because the population has increased more rapidly than the housing supply, which is restricted by planning laws. Rents in the capital tend to be lower than in other German cities, such as Frankfurt or Munich, but the increase is higher than anywhere else.

The trouble with the rent freeze is that it is likely to deter potential landlords and make the supply squeeze worse, especially if building regulations aren't eased. The measure must still be approved by the Berlin regional parliament, but could be made law by early next year, and backdated to 18 June.

Campaign for confiscation

Berlin has "an unusually high number of big property players when compared with other European capitals such as London, where even the biggest landlord, Grainger, owns only around 1,500 units", notes Philip Oltermann in The Guardian. DW has questioned the legality of the proposal, although three legal surveys (commissioned by the Berlin senate) support it.

London-listed Phoenix Spree Deutschland, whose shares have also slid by a fifth, last week reassured investors that it had adapted to previous rent controls and suggested the freeze may be unconstitutional.

It's also worth considering that with rents frozen, property development is likely to fall, which could push up capital values. However, given that Germany's Social Democrats have raised the idea of a national rent freeze, according to Reuters, if you hold German property funds, we think now is the time to sell out.

Recommended

What’s behind New Zealand’s runaway house prices?
Property

What’s behind New Zealand’s runaway house prices?

House prices in New Zealand have hit record high and show no sign of slowing down. Nicole Garcia Merida looks at what’s going on.
16 Apr 2021
Properties for sale with mountain views
Houses for sale

Properties for sale with mountain views

From a private residential estate in Pitlochry, Perthshire, to a family house in Santa Barbara, California, eight of the best properties with mountain…
16 Apr 2021
House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
The global property bubble
Property

The global property bubble

Forget equities, the real post-pandemic action has been in property. And not just in the UK – it is a worldwide phenomenon.
9 Apr 2021

Most Popular

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021