A Flood of Updates and Interpretations on The "Mietendeckel" Rent Cap To Be Expected

You are the proud owner of a residential rental property, a buy-to-let plan?

If you have not heard about it yet, you will soon from your property manager or tenant. There are already various interpretations going around and none less than the German Federal Government is planning to take the regulation to the Constitutional Court in Karlsruhe.

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To recap the latest main events:

The Berlin city parliament voted on Thursday, January 30, 2020, to pass the rent cap “Mietendeckel” draft into law. It will most likely come into effect at the beginning of March, possibly as early as the end of February when officially published.
This will trigger numerous deadlines for actions required to be taken by the landlord.
The answer to a much asked question:
Yes it does apply to furnished apartments completed before 2014.
We are offering a newsletter, starting with a summary and interpretation of the law as it went into the parliamentary hearing. going forward, we will be providing hands-on tips on the communication and the timeline that needs to be met starting with the information needed.
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A Flood of Updates and Interpretations on The "Mietendeckel" Rent Cap To Be Expected

The Federal Government Plans to Tighten The Restrictions on Rent Increases in Germany

Katarina Barley, new Justice Minister, about future Housing Policy of the Federal Government

ARD "Bericht aus Berlin" 18.30 , 25.03.2018

Immediately in Barley's area of responsibility, is the rental price brake, which is to be tightened according to the coalition agreement. Barley announced that in the future the landlord should provide information about the amount of the previous tenant's rent. If it turns out that the new rent is too high according to the rental price break regulations, tenants should get the opportunity to reclaim the rent, including retroactively and have the current rent adapted. The Minister intends to present a draft bill before the summer break.


The Interview in German

"Outmodernizing" can be expensive

Barley also wants to prevent tenants from being burdened with modernization measures "beyond reason". In many cities, one can see that long-term tenants are specifically "modernized out" of their apartments, the minister said. Such a "targeted" procedure should be punished in the future as a violation. Tenants should also be given the opportunity to assert claims for damages.

Barley rejected the argument that this would impede housing construction. The apportionment of "normal modernization" should even be facilitated, that is, stripped of hampering bureaucracy. The minister suggested fines in a range of up to 10,000 Euros. She also emphasized: "Where luxury modernization is abusive, we will make it harder, and that's right."

Commentary

Rental Price Break and limitations on "luxury" modernisation are at the top of the agenda of Germany's new Justice Minister Katarina Barley. It seems to be a tribute to the political base of the SPD for joining the coalition against a substantial number of members wanting to stay in the opposition.

Both topics are full of legal traps. While the current version of the Rental Price Break has been challenged by lower courts and is on it's way through appeals, a new version is being hammered out. An upgraded version is planned to be presented to parliament before the summer break.

The limitation of "luxury" modernization seems an even bigger legal minefield. The definition of "luxury" depends on many factors. Most likely it will pick up on the norms used in regulated urban development areas called "Milieuschutzgebiet". These norms are orientated on average sizes and standards, e.g. a new balcony added in a modernization is not allowed to be bigger than 4 m². More details here: https://germanproperties.blogspot.de/2018/03/the-can-do-and-cant-do-renovating.html.

The Federal Government Plans to Tighten The Restrictions on Rent Increases in Germany

Residential Property in Berlin: Rent and purchase prices keep rising

Rent and purchase prices for residential properties in Berlin keep rising. This is the conclusion of the 2011 Residential Market Report (Wohnmarktreport für Berlin) by GSW Immobilien AG and CB Richard Ellis. Despite growing demand and sluggish development of construction the report sees no danger of an actual shortage of residential offers.

On average rents and purchase prices for residential properties have increased by 4 % to 8 % in 2010. A continuation, even acceleration of last year’s market development. Looking at different market segments by location the picture somehow varies: Better locations benefit more than lower market properties.

Landkarte von StepMap

According to the study average rents increased by 4.5% compared to 2009 from 5.85 to 6.11 Euro per square meter per month (€/m²). The cheapest 1/10 only went up by 2.9% moving to 4.30 €/m².


A drastic rise by German standards was experienced for apartments with high value standard. The average rent increase of the top 1/10 went up by 14% to 10.96 €/m² and purchase prices for condos by 7.9 % to an average of 1,739 €/m².
Across all market segments locations were just as spread in their development. Charlottenburg-Wilmersdorf took the lead in the districts table with an increase of 10.2 % to an average of 7.52 €/m² across all quality segments. Followed by Freidrichshain-Kreuzberg at 7.22 €/m² and Pankow ant 6.90 €/m². The low end is made up by Reinickendorf (5.56), Spandau (5.26) and Marzahn-Hellersdorf (4.69).

According to the study the main factors contributing to this development are the growth in population and job-opportunities accompanied by smaller households (heads per household). On the supply side the number of newly build apartments was very low throughout the last 10 years and has remained at that level in 2010. A price increase is only natural.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.


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Uwe Falkenberg 

Residential Property in Berlin: Rent and purchase prices keep rising

Real Estate Investment, Pre Acquisition Phase

The first article of the series is about to be published:

Information Gathering (Part1)

The Pre-Acquisition Phase in a Real Estate Investment is most likely the most difficult phase with far reaching impact on the entire outcome of a Property Investment. Your Investment Philosophy is set, the Property Market Research and the pre-selection are done. There is not all the money in the world to be paid on the elimination process and the vendors and agents will push for a decision because other investors are interested. Who knows, they might even exist and snatch the best property you have seen in years from under your nose. So there is the other factor next to money: Time - or more precisely speed. I will show which processes will need to be applied to make an informed judgement.

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Real Estate Investment Research.

Real Estate Investment, Pre Acquisition Phase

Rising residential rents in Germany

According to official statistics the number of new building permits has declined dramatically in 2007. In Bavaria e.g. by 40%. This is related to reduction in tax incentives for newly built property and modernisation on properties.
Property market experts already see significant rises in rents for residential real estate, in some regions by 5% compared to the previous year. Over the next years a 10% rise is deemed to be likely.

Commentary:
The positive outlook for investors is self evident. However the raise of the general rent level does not mean automatic increase in income. The opportunities and best approach need to be assessed and appropriately managed to receive the most drive on the value of the property. An effective Asset Management Strategy is key to get the most benefit out of this opportunity.

Rising residential rents in Germany