Realtor Realities

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Raising the roof but not the rent, thanks to Germany's new rules.
  • Why it matters

    Why it matters

    The new rent control law will not have much effect on real estate investors. Germany offers solid, if not spectacular, returns and great growth potential.

  • Facts

    Facts

    • The new rent control law states that landlords may not raise the rent by more than 10 percent compared to the average price in the neighborhood.
    • Home ownership stands at only 43 percent in Germany,  as opposed to 70 percent or more in other large European countrie
    • The real cause of rising prices is the existing supply and demand gap.
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  • Audio

    Audio

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Germans tenants are a spoilt bunch. In a country where home ownership stands at only 43 percent as opposed to 70 percent or more in other large European countries, they enjoy unconditional support from lawmakers hungry for votes.

A new law capping rents known as the “Mietpreisbremse,” or rent-price-break, is likely to go through parliament before the end of the year. To some people, capping rents may seem reminiscent of centralized planning in Eastern Europe during the cold war. But actually rent caps in Germany are nothing new – they have been in place since 1954.

The key feature of this new law is that landlords will not be able to raise rents above 10 percent above the average price of the neighborhood when renting to new tenants. As a concession to landlords, new buildings and properties that have undergone significant renovations will be excluded in order keep investments coming in. Ironically, the new bill requires owners only, and not tenants, to pay broker commissions for letting flats. The latter is unconstitutional according to many industry experts, and may be struck off or modified before the drafted legislation will pass.

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