Swedish listed housing investor Akelius published its nine-month accounts recently, and noticeable was the lack of any residential price appreciation on its considerable Berlin and Hamburg housing assets. The company has largely abandoned its effective business model of upgrading housing through extensive renovation, as in the past.
Akelius in Germany booked rental income from its residential housing of €356m for the first nine months of the year, slightly down (4.7%) on last year’s €373m, largely due to the reduction in its portfolio. Like-for-like income rose by 5.3%. Pre-tax profit fell to €79m, from €364m last year, due to lower valuation appreciation.
In a statement, new CEO and Managing Director Ralf Spann wrote that the “good times” for the purchase of residential real estate with appreciation potential are over. The focus in future will be on increasing rental income in the portfolio and the acquisition of rental properties “with strong cash flow”.
Akelius announced at the beginning of September that 400 of its current 1,500 jobs in Germany would be cut by the end of 2022, in addition to the termination of 58 of its employees in its Berlin building division. Expensive renovation was no longer worthwhile in Berlin because of the rent cap, or Mietendeckel, it said. Once ongoing building work on its housing was completed, it expected to generate a further annual income of €25m by reducing its vacancy level, it said.
In a recent media interview with German newspaper Tagesspiegel, Jordan Milewicz, Akelius’ youthful Head of Europe and successor to Ralf Spann, said the company was still interested in buying residential housing, also in Germany, but now they were targeting more modern apartment buildings in larger cities, but with less of a maintenance backlog.
“What is generally missing, especially in Berlin, is inexpensive living space between 5 and 7 euros per square meter, ‘net cold’. It is the task of politics to make this achievable. We believe that the rent cap is the wrong instrument, because it divides society. On the one hand, there are those who already have an apartment. And then there are those who are moving to Berlin for the first time or are reorienting themselves, and they CANNOT find an apartment.
On the company’s Berlin plans, Milewicz said: “The focus will continue to be on holding the existing stock. We will selectively sell condominiums in Berlin and will start with two properties, but under no circumstances are we parting with our Berlin properties completely. In Hamburg, we have been selling apartments to tenants and also to capital investors for some time now, because we don't want to have a “Swiss cheese”. We have our ear to the market and have noticed that there is a strong demand in the capital city from people who would rather buy than rent their apartment. We are now reacting to this demand.”
On the rent cap, he said: “Our vacancy rate is less than 1%. When we place an ad, we receive hundreds of requests the same day for the apartment.
“We are heading back to the eighties - there are much fewer offers, because for many people it is no longer worthwhile renting out their apartment. Akelius has less than one percent of the total market in Berlin. The majority of the housing stock is in the hands of small landlords. They are now frequently considering just selling their property completely. As a result, the supply of condominiums has increased – a development we have consistently warned about.
“In Stockholm, where rents are capped, there is a waiting list of 60,000 people looking for apartments in the city centre. Getting an apartment takes up to 20 years. If you have money, you can buy yourself into a lease for €15,000 - and that's where we’re headed with this Berlin rent cap.”
