/Berlin prepares for a snowstorm in renting prices

Berlin prepares for a snowstorm in renting prices

Recently, the Wall Street Journal published an article affirming that the Millennials generation is leaving the American urban centers to build a life in the suburbs. Feels like a ‘déjà-vu‘? Fifty years ago, the baby-boomers did exactly the same migration, but this time the young adults are not seeking green lawns and white fences, they are indeed running from high rent pricing.

In Europe, the situation is not that different. In Berlin, Germany’s capital, housing costs have doubled over the past decade. Even though the construction sector of the city is developing fast, according to German real states companies, much of what reaches the market is beyond the power of low-income residents.

In an attempt to slow down this phenomenon in Berlin and keep the young workers in the city, the local government decided to temporary freeze rent prices for five years from 2020. Senator Katrin Lompscher, from the Urban Development and Housing Senator, who is responsible for the project, will present the bill to be voted upon by the German Senate tomorrow (October 15th). If this measure is approved, it will protect 1.5 million apartments against rent increases.

CONCERNS

According to a Vonovia SE representative, the largest residential property company in Germany, this new measure will exacerbate the problem of insufficient supply of new housing, as well as prevent investments in energy efficiency and senior friendly apartment refurbishments, making the problem “worse for anyone looking for a place to rent in Berlin.

“A rent freeze law would be going in the wrong direction and in no way solve the problem for tenants in Berlin or for the tens of thousands of people who move or want to move to there every year,” she said.

The German student Julie Hano, 20, lived in the capital all her life and think this is a bad idea. “Freezing rent is just delaying the effects that high housing prices have now. Once rent isn’t frozen anymore, the landlords will raise the prices and kick people out that cannot pay the raised rent anymore.

She believes that Germany should rather focus on building more affordable apartments in bigger cities and expand public transport, in order to make commuting more appealing as well.

BUSINESS AFFECTED

Berlin has been until now known for its ultra-low living costs. However, a property boom drove up rents by more than 50% since 2011 and transformed landlords like Deutsche Wohnen and Vonovia SE into leading performers on the stock exchange.

The prospect of a clampdown on rents didn’t brought much smiles at the sector. A lot of real estate companies protested against the new policy. One of the most impacted was Deutsche Wohnen SE, Berlin’s largest apartment owner and the focus of protests about rising rents and the shrinking supply of housing in Germany’s capital. The shares of the corporation have dropped by almost a quarter since the city government announced its intention to rein in landlords.

“We convinced that the rent freeze law planned by the Berlin State Government is unconstitutional”, affirmed Nina Henckel, from Vonovia SE, Germany’s largest residential property company.

Even under protests, the measure appears to be moving toward it approval, according to industry experts. Compared to Uncle Sam’s land, Europe does not seem that willing to let the new generation escape. For the market this is not very attractive, now for students it may be an opportunity for them to live in one of the most cosmopolitan city in the world.