More construction needed to ease German housing pressure - Aengevelt

In a recent issue of REFIRE we published a list of the key changes to the tenancy law recently signed off on by the German Bundestag (lower house of parliament), and what effects this will likely have on tenants and landlords alike.

The subject was one that was obviously a topic for discussion at the recent CIMMIT conference in Frankfurt. Never short of an opinion on these matters is Dr. Wulff Aengevelt, of the Düsseldorf-based property-advisor group Aengevelt Immobilien whom REFIRE spoke to at the conference. Here’s a basic summary of his views.

“The changes to the tenancy law include a number of eminently sensible improvements, particularly in respect of landlords’ rights to vacate dwellings where tenants are clearly intent on avoiding rental payment. Measures to share the costs of energy-saving improvements also make a lot of sense.

“Changes were also introduced in respect of permissible rental increases. Under the new law, residential rents on existing contracts may not be increased by more than 15% in a three-year period, rather than the earlier 20%. But remember, the laws are not necessarily being imposed nationwide – each individual federal state is entitled to set its own laws.

“The capping of these rates does not go far enough for the opposition SPD, however, who want to impose a four-year period, rather than a three-year period, over which these rent increases can apply. On new lease agreements, furthermore, they want to impose a cap of 10% above the local permissible comparable rent.

“None of this is likely to prove a boon for the construction industry, for these measures are likely to put even further pressure on an already low-margin industry. Should interest rates rise, the negative effect will be even more stark and further reduce the already low level of new construction in the residential sector. The result will be even more scarcity of housing and further upward rental and price pressure, particularly in the larger cities.

“The only thing that will really help is an adequate supply of quality new and renovated housing – even if that means slightly higher rents for an ‘improved product’ in new-build housing. Let's have less of this political ideology and let's find more realistic housing solutions.”