German government allows fresh depreciation on new resi build

Germany's coalition government has agreed in principle a new draft law designed to promote construction of more housing in the country's major cities.

In essence, the new law envisages the following: For the first three years after completion or acquisition, a special depreciation allowance of 10% in the first two years and 9% in the third year will apply. Building applications must be submitted before the end of 2018. The basis of assessment has been set at €2,000/m² of living space. The special depreciation allowance is also restricted to apartments with construction or acquisition costs of less than €3,000/m² of living space, thus putting the applicable housing in the 'affordable' category. The allowance is also limited to specific regions.

In determining the so-called “assisted areas,” the new regulation refers to housing benefit rules, the Mietpreisbremse rental price brake and the lower-level cap on rent increases. Assisted areas will include areas rated in bands IV to VI of the housing benefit regulations, along with those that have already introduced the Mietpreisbremse and the reduced rental increase cap of 15%. Industry associations have generally been warm in welcoming the new regulations. However, the IVD was critical of the exclusion of the special depreciation allowance for partnerships and the relatively short period of three years over which the allowance can be applied. The shortage of housing in Germany's major cities will not have been addressed within such a short timeframe.