Resicom – Holiday Investment – 04-21 – LB

Berlin City Rent Freeze Approved

The previously reported Berlin rent freeze has now been approved by the Berlin City Government to be introduced from early next year.

The new Berlin city legislation caps rent at €9.80 per square metre until the end of 2024 and landlords will only be able to increase rents by 1.3%per cent a year to compensate for inflation. Any landlords who fail to meet the requirements could be fined up to €500,000.

Existing rents will only be lowered in rare cases, for example if they exceed the newly established ceiling by over 20 per cent, while if rents exceed the new limit, tenants will be able to force the landlord to lower it.

The new Berlin city regulation will affect over 1.5 million properties built before 2014, around three quarters of apartments in Berlin, except for some Government owned social housing and property built after 2014.

It has been argued that the new law will limit the number of available apartments for rent, discourage landlords from maintaining them, and steer overseas property investors away from Berlin’s property market.

Berlin’s SPD, Left, and Green-dominated Senate voted to freeze rents in the capital for the next five years last June – the first city in Germany to do so, but the legislation was only finally voted on and passed in October.

George Kachmazov, managing partner at international real estate platform Tranio, commented: ‘The attempt to artificially regulate Berlin’s rental market won’t be well received by overseas investors, who will surely become more cautious about where they put their money.’

He continued: ‘Freezing the rates won’t make investors sell their apartments, as there’s currently no better alternative for capital placement, especially if they want to buy real estate with euro-denominated yields.

It is thought that the Berlin city rent freeze will probably lead to a higher demand for new builds, micro-apartments and for mid-term furnished rental apartments, which are exempt from the regulation.

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