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The impact of the new German rent controls – a case analysis for Berlin and CologneProf. Dr. Michael VoigtländerResearch Unit Financial Markets and Real Estate
London, 19 March 2015
Research Unit Financial & Real Estate Markets
contact
Prof. Dr. Michael VoigtländerHead of Research Unit Financial and Real
Estate Markets
++49 221 4981-741 [email protected] www.immobilienoekonomik.deTwitter.com/mvoigtlaender
Research Focus
Housing Policy and Real Estate Economics
Real Estate and Corporate Finance
Monetary Policy and Financial Markets
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 2
Content
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 3
Background
Rental indices in Germany
The New Rent Control
Effect on rents in Berlin and Cologne
Conclusion
Major Cities in the growth modeChange in the demand for living space between 2012 and 2030
6% 7%
14%
2% 3%
7%
4% 3%
-4%-6%-4%-2%0%2%4%6%8%
10%12%14%16%
4
Source: IW Köln, Bertelsmann Stiftung
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London
A Shortage of Construction in Major Cities
Source: IW Köln, Statistisches Bundesamt
5Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London
Content
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 6
Background
Rental Indices in Germany
The New Rent Control
Effect on Rents in Berlin and Cologne
Conclusion
Introduction of a rent control
New rent contracts max. 10 percent above the local reference rent
Applied in „tensed housing markets“, initially for 5 years
Exceptions:
Newly Constructed Buildings
Extensive Modernizations
Source: Fotolia
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 7
Content
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 8
Background
Rental Indices in Germany
The New Rent Control
Effect on Rents in Berlin and Cologne
Conclusion
Rental indices in Germany
Qualified Rental Indices
• Data sources: interviews
• Rental prices of new and existing stock of the last 4 years
• Renewed index all 2 years
• A range for prices according to location, quality and subjective criteria
Normal Rental Indices
• Negotiated between landlords association, tenant association and the city
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 9
Rent indices in Cologne and BerlinBounds of comparability
Many characteristics are measurable and comparable…
• Apartment size
• Year of construction
• Modernization
… but what is a
„good“ location?
Source: Fotolia
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 10
Overview: Advertisements in Berlin (2014)Number of Ads: 65.000
Source: ImmobilienScout24, Cologne Institute for Economic Research
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 11
Hot Spot Analysis for Berlin (2014)
Source: ImmobilienScout24, Cologne Institute for Economic Research
Cold Spot
Hot Spot
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 12
Hot Spot Analysis for Köln (2014)
Source: ImmobilienScout24, Cologne Institute for Economic Research
Cold Spot
Hot Spot
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 13
Content
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 14
Background
Rental Indices in Germany
The New Rent Control
Effect on Rents in Berlin and Cologne
Conclusion
Share of rental bids above the threshold level in Berlin and Colognein percent, based on the relevant market (without modernization and newly constructed buildings )
15
Quellen: ImmobilienScout24, Institut der deutschen Wirtschaft Köln
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London
City Apartment Size good Location average Location ordinary Location
Berlin
until 40 m² 98 87,7 80,1
From 40 m² till 60 m² 68,8 53,7 27
From 60 m² till 90 m² 63,4 54 26,5
Above 90 m² 63 46,5 38,3
Cologne
Around 40 m² 51,4 26,6 92,8
Around 60 m² 25,5 16,9 74,7
Around 80 m² 43,0 19,2 93,7
Around 100 m² 53,4 31,4 86,6
Around 120 m² 49,4 35,8 95,8
Share of affected advertisements by the rent control (Berlin)in percent
Berlin 2014
Fallzahl < 50
Anteile
0 - 19,4
19,5 - 38
38,1 - 55
55,1 - 69,3
69,4 - 86,1
0 4,5 9 13,5 182,25Kilometer
±
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 16
Source: ImmobilienScout24, Cologne Institute for Economic Research
Overall share of advertisements above the rent control in Berlin in percent
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 17
Source: ImmobilienScout24, Cologne Institute for Economic Research
City Share…good
Locationaverage Location
ordinary Location
Berlinin all rental listings 21,9 25,2 10,4
in relevant rental listings 72,4 61,2 41,4
Colognein all rental listings 13,9 9,45 26,1
in relevant rental listings 42,7 23,8 86,8
Content
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 18
Background
Rental Indices in Germany
The New Rent Control
Effect on Rents in Berlin and Cologne
Conclusion
The rent control is a rent freeze
• Especially small and old apartments located in good areas are affected
• Experiences in other countries show severe problems of rental freezes
• Transformation in owner-occupied flats is likely to happen
Source: Fotolia
Prof. Dr. Michael Voigtländer, The New German Rent Control, 19 March 2015, London 19