Boon for Whom? Confusion of a Berliner
Through history there has not been an important draft law which had the power to change the capitalistic view of the German Economy. The discussion of such a bill sent chills down the spines of Capitalist. It has also shocked the share market on 26th of August by bringing down the value of Deutsche Wohnen and Ado Properties to almost as high as 4 percent. It's time for the stock investors to take a serious note of this and practice caution. After the acceptance the law is applicable as of 1st January next year.
What's this Whole
Trendy Draft law About?
Berlin, the capital of Germany and one of the most important economic centers of the world has come up with a plan to regulate rent which in the past 10 years (between 2008-2018) has risen almost 90 percent. For example the rent of a house which was 500 Euros in 2008 is now 950 euros. It is to be noted that the first step has already been taken by the Berlin Senate which froze the increase of rent in middle of June. Senate wanted to provide its residents with some breathing time
The Urban Development Minister Katrin Lompscher introduced the tenant friendly Mietdeckel (rent cap). This would make all the exisiting houses cheaper for the tenants independant of the region of its location. Most of its benefits will be reaped by those living in posh areas like Mitte, Prenlauer Berg where currently the average rent per square meter is as high as 17 to 18 Euros, which by the tenant friendly Mietdeckel can drastically reduce.
The Age of the building will decide the correct amount of rent. All apartments completed before 2013 will be subject to new price caps for the next five years. If Constructed between 1991 and 2013, the owner may charge 7.97 Euros per square metre. A century old apartments has an upper limit of 6.03 Euros.
How is the Supply and
Demand ?
New construction often takes years - and in
the sought- after inner city locations, where demand is particularly high, it
is often difficult to create new living space while it has been already built
fully. This often makes the housing market an El Dorado (Fantasy Gold Mine) for
speculators, who can buy real estate where demand rises sharply and afterwards
reap very high profits for years.
What Landlords and
Tenants Get ?
- High-income districts such as Charlottenburg, Mitte or Prenzlauer Berg will be able to enjoy rent reductions.
- Small
landlords who
have bought an apartment for their old-age provision will have to reckon
with the fact that their income, with which they have just been able to
pay off the loan, will simply be reduces. Unfortunately, not
everyone can afford such losses.
- Owners ,who bought appartment for
personal use, will now have a significantly lower value than
their buying price before 2 or 3 years.
What are the
Consequences ?
Builders mindet: The Already
high demand for apartments in Berlin will probably increase even
further. The supply, on the other hand, will hardly
grow. who is going to build new apartments if he has to expect that
they will possibly fall under the rent cap at the next rental in a few years'
time?
Greater Injustice: The division of
the housing market into INSIDERS and OUTSIDERS is inevitable.
Insides are all the lucky ones who have a nice cheap apartment. Outsiders are
those who would also like to live in the city centre, but will have practically no
chance of doing so in the future especially students.This
has very little to do with social justice.
Investors Interest: If draft is
adopted,Berlin will become a laboratory for a housing policy that practically
completely abandons the market principle. So
it increases the chances that Berlin
slipping down from the current top position of top
investment targets in Europe within a few weeks is possible.
Sources :
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