First it was the rent ceiling in Berlin, now it is regulation of land prices. Developments at federal level give little cause for hope.
The rent ceiling remains a hotly disputed topic, although finding someone who thinks the cap will stick around for long is quite a difficult task. Even Berlin Senator Katrin Lompscher, from the leftwing party Die Linke, is advising tenants not to spend the money they have saved through the cap, as these funds may have to be repaid. But the damage has already been done. The additional administration costs, lost rental income for the city’s municipal housing societies and the expected tax deficits already run into the hundreds of millions. The city state’s coalition government is hoping that the savings on rent will help stimulate the economy. This is contradictory, given that renters are being told not to spend the money they are saving. But that’s not the end of things either: Katrin Lompscher now wants to introduce comprehensive regulation on land prices; the Greens and the centreleft Social Democratic Party of Germany (SPD) have already indicated that they will back the plans.
It is clear to see that the rent ceiling is by no means the end of the story for the German capital. Further significant intervention into the city’s property market is just around the corner. All in all the climate for investors, project developers and their backers is not very attractive.
If the Greens were to play a part of a coalition government at federal level, the trend towards increasing market intervention could spread all over the country. Considerable changes could then also be expected when it comes to transport policy, especially given that the transport revolution – of all areas of climate policy – is falling the furthest short of its goals. Even though economic development figures generally give us no cause for concern, fundamental changes are on the horizon, particularly in the automotive industry. And such changes won’t pass the real estate industry by without consequence. After all, the automotive industry is one of key drivers of Germany’s economy and has an impact on many other companies. Employees who fear for their jobs will no longer be in a position to enter the real estate market.
Interest rates
Long-term interest rates fell once again by a small margin month on month. The ten-year swap rate stood at 0.06 percent at the beginning of the month and rose to 0.17 percent at times before falling back down to 0.05 percent by the end of the month. The six-month Euribor remained at 0.343 percent in November under light fluctuation. The three-month Euribor varied only slightly between the -0.394 and -0.408 percent marks over the course of the month.
Outlook
The SPD have publicly declared their willingness to form a coalition with Die Linke and the Greens – or, to be more accurate, with the Greens heading the group – at federal level. The nomination of the left-leaning Saskia Esken and Norbert Walter-Borjans as the new SPD leadership brings this possibility that little bit closer. The situation in Berlin provides an indication of what we can expect to happen to the real estate and residential property industry across the country.
The real estate industry will at least be able to rely on monetary policy to lend support. With the low-interest policy is expected to be continued under the new ECB President Christine Lagarde, real estate will remain in high demand as a form of investment. However, investors are expected to turn more toward commercial real estate and serviced apartments to protect themselves from any further tightening of rental laws.
