Berlin's housing market - The tension in the summer before the election

A good two months before the election to the House of Representatives, the Left Party and the Greens lead the polls with 20 and 19 percent respectively, the AfD is third with 18 percent and the CDU only comes in fourth place with 17 percent. The most important issues for eligible voters in Berlin are housing and rents at 30 percent, ahead of mobility at twelve percent. However, a fifth of Berliners also do not trust the parties to solve their problems. This is the result of the latest Berlin trend by Infratest Dimap on behalf of RBB24-Abendschau and RBB 88.8.

Uwe Bottermann, lawyer and partner at Bottermann, discussed the impact and background of the expected election result on current events on the Berlin residential real estate market::Khorrami, Philip C. Hetzer, Managing Partner at DAHLER Invest, Dr. Simon Kempf, Managing Director Periskop Development, Claudius Meyer, Managing Director CR Investment Management, Jacopo Mingazzini, CEO of The Grounds, and Sascha Nöske, CEO of Strategis AG, during an online press conference.

Jacopo Mingazzin sees the impending election result as a real threat to the real estate industry. "I would like to remind you of the former red-red-green housing policy with rent cap, expanded milieu protection areas and the exercise of pre-emption rights. From my point of view, sand was deliberately thrown into the gears of the real estate industry at that time. In my opinion, a resumption of this policy is not only problematic for investors, but also for owner-occupiers and tenants, because it is likely to further inhibit residential construction and market activity."

In his analysis, Sascha Nöske criticized the CDU for lacking a recognizable candidate and a credible economic policy alternative to the left-wing camp. Dr. Simon Kempf saw the problem in the fact that the CDU and SPD, as governing parties, could not simply take on an opposition role. Many of their reforms, such as administrative reform or faster procedures, are important and are hardly noticed by the general public. "The challenge is to make these advances understandable beyond the specialist audience."

Claudius Meyer criticized that the conservative camp offered neither a convincing person nor a credible topic. "The problem of high rents is real and is occupied by left-wing parties, even if their solution, especially the socialization of housing, does not work. The basic problem is a glaring lack of supply; Investments, new construction, renovations and permits must be strengthened. This requires a big leap and not small-scale individual measures."

Meyer is also certain that the discussion about socialization has harmed Germany as a business location as a whole and has hindered and prevented investments in real estate in recent years. "Globally active fund companies do not differentiate between Germany and Berlin. If expropriations are possible in the capital, why should they be excluded in the rest of the country and limited to rental housing? That's a question we've been asked regularly in recent years." Therefore, the federal government should have intervened long ago.

Uwe Bottermann legally classified the federal initiative, with which the SPD and CDU want to prevent the socialization of housing by law. "In principle, the federal government can block state regulations in the area of competing legislation. However, a federal law must be substantially justified and must not only have the purpose of preventing a state law." It is therefore crucial to formulate the issue as a pan-German question of investment and legal certainty. At the same time, he warned: A federal law would also trigger new constitutional discussions; the conflict is not automatically settled by a federal law.

Philip Hetzer reported that the years of threat of socialization had already led to restraint on the part of private and institutional investors. However, after the latest signals from the federal government, there are first signs that investors are again cautiously examining Berlin.

The participants also agreed that the housing crisis cannot be solved by redistributing existing apartments, but only by increasing supply. Dr. Simon Kempf expressly praised parts of the work of Berlin's urban development policy over the past two and a half years. He referred to the Faster Building Act, the Construction Turbo, the guideline for its application and progress in stalled projects.

At the same time, Kempf emphasized that these measures alone are not enough. The state cannot finance housing construction alone. It is crucial to channel private capital back into the real estate market. In view of attractive government bonds and high regulatory risks, real estate investment must become more competitive again. Kempf named as options a strengthening of property, tax improvements and state guarantees, which would not have a direct effect on liquidity, but could facilitate financing. In the run-up to the upcoming vote, on the other hand, it would be a matter of making current projects "election-proof". "Directional decisions, resolutions and votes should be completed as far as possible so that long explanation and coordination processes would not be necessary again after personnel changes," said Kempf. "Because political changes often cause considerable friction losses."

In the case of the rent register, the experts differentiated between possible benefits and political risk. Uwe Bottermann said: "A rent register can have a positive effect if it serves to objectively record existing rents and lease qualities and leads to a better rent index. However, it is problematic if it is to be used to prosecute administrative offenses and misdemeanors. Then there is a risk of de facto self-incrimination by landlords." Philip Hetzer shared the positive view of more transparency, provided that the data were used for a more realistic rent index.

Jacopo Mingazzini, on the other hand, sharply criticizes the Berlin rent index. "The dispute over the tender shows that the Senate has ignored scientific objections." From his point of view, the rent index is politically designed to reflect low rents and therefore not a reliable basis for determining rent levels in line with the market. Under these conditions, the rent register could become a further instrument of regulation and sanctioning. "As a result, we have a situation in which a very high proportion of private small landlords are thinking about exiting the rental market, as survey results from Haus & Grund also show."

Sascha Nöske pointed out that not only investors, but also project developers who built new buildings had alternatives. If housing becomes too risky or politically uncertain, capacities are channeled into uses such as data centers or other asset classes. However, this does not solve a housing shortage. The competition for capital and entrepreneurial attention is real.