Rialú cíosa, nó cén fáth nár cheart go mbeadh eagla ar dhaoine infheistíocht a dhéanamh i mBeirlín. Treo domhanda…
Rent control, or why people shouldn’t be afraid to invest in Berlin.
Global trends are hitting the small and relative static market in Israel, and we can learn a lot from whats going on over seas.
Sooner or later a populist politician will come around and will try to get a “like” from the local voters by implementing regulations and laws against those who have, in order to “help” those who don’t have.
There is already a strong hotels lobby pressuring to limit AB&B, TLV municipality doubled the Arnona for an AB&B assets, and that’s not the end of it.
Similar talks stated in the last Kneset by Folkman and Shafir to impose rent control by which home owners will not be able to increase the rent for a specific period of time and under specific conditions.
Is it a bad thing? It is.
Is it helping the renters? Nop.
Is it creating an advantage for home owners? Yes.
Last month the Berlin’s city hall passed a law that freezes the rent for five years. I would like to show you how this decision made Berlin a prime market for investors.
Before ill start I want to state that im writing based on my knowledge and experience and most important – my opinion. This is by no means a recommendation, or advice. You do what you want to do with your financial means.
Also, I don’t own assets in Berlin. In the German real estate context I own assets in Munster and im very happy with them.
1. Who made the law and why –
laws are made by politicians. Politicians wants to get re-elected. The laws regarding real estate are not done by business man or professionals, nor by economy experts. Laws are done with a political view in mind.
In Berlin, almost 90% of the residence are renting a house. This amazing number includes East Berlin as well. Unlike markets like Romania, where in Bucharest 95% of the people live in their own apartment, and the population prefers to be home owners, Berlin’s residence are not.
laws are made for that population.
2. Why rent control ? –
Rent control is perceived as an assurance against increasing cost of living aspects where housing takes a big portion of. It is also one of the best way to gain popularity and easy support. Naturally, there are more who “don’t have” then those who “do have”.
Rent control also aim to cool a market down. Berlin’s popularity amongst the European youngsters and work based immigrants caused the rent price to grow every year.
A recent study carried out by the Knight Fox consultancy concluded that property prices were rising faster in Berlin than anywhere else in the world; they jumped 20.5% between 2016 and 2017. In Kreuzberg over the same period, the rise was 71%.
Foreign companies opened businesses in the city, bringing a wealthier population that could afford the increasing rental costs, leaving behind a vast number of “traditional” renters who couldn’t keep up with the increasing cost of rent. This brought the residence to object the introduction of new big corporations to the city. Not long ago Google pulled out from Kreuzberg after two years of fierce demonstrations.
3.1 why Rent control causes an increase in rent and in assets value? – taking Berlin’s new law, which is stating that rent shell not be raised for five years, we can expect two situations to take place:
A. IF the law refers to ONLY new contracts, while current contract will abide the law once terminated or with in a specific time period – ALL available assets for rent will increase their rent in order to secure the next five years of no increase. As time goes by, only a handful of apartments will be released to the market ( contract stipulated in 2018→ release in 2023, contract stipulated in 2016→ release in 2021, contract stipulated in 2015→ release on 2020 etc. ) and as such, there will be MORE people needing a rental solution while the amount of available apartments has dropped significantly.
B. IF the law “resets” all contract, and all the assets will have the same “expiration date”, renters will offer a higher price / home owners will ask for a higher price knowing that there is a short period of time in which assets are available but the demand has grown.
3.2 Asset value – investors and companies don’t like regulations, and not all of them are able to see far. Companies cannot adopt the credo of “real estate is a marathon run” because they need to show profit, pay salaries, pay dividends and report to their share holders. Individual investors often have the same problem and they don’t pause to analyse how a seemingly “bad” situation is actually good for them. Many will sell their assets, while companies will not build new assets. This means that YOUR asset has much less competition and therefore – has more demand and as a result, its value goes steadily up.
4. Rent control is an easy patch which politicians apply over a previous patch which in turn was applied over yet another patch. Its not the right long term solution. Each attempt to “engineer” the market causes more chaos that takes longer and longer time to correct.
examples from the world have clearly shown that rent control kills markets, hurt those who in need of rent, promotes black market, promotes corruption. Causes law maintained assets, reduce the availability, increase the cost of purchase and rent, creates a very long waiting list and more. Carl Assar Lindbeck wrote after researching rent control: “Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities”. In Israel, the long term rent projects are pure joke. This is why not a lot of developers are going for it, and those who go… well, see for yourself:
this is from July 2018:
במחיר קבוע ל-20 שנה: הצצה לפרויקט שכירות ברעננה
השכרה לטווח ארוך נחשבת לפתרון משלים חשוב למצוקת הדיור אך בישראל כיום יש רק 5 פרויקטים כאלה בשלבים מתקדמים • בדקנו מי בוחר לגור שם ועד כמה זה משתלם
and this is from February 2019, just seven months after ( same project ) –
הדיירים נדהמו: שכר דירה בפרויקט שכירות ארוכת טווח זינק בפתאומיות
דיירים בפרויקט שכירות הוגנת ברעננה קיבלו התחייבות ממשרד הבינוי והשיכון ליציבות מחירים במשך 10 שנים. למרות זאת, בחודש שעבר – כשנתיים וחצי מאז האכלוס – בישרה היזמית, חברת רובינשטיין, כי הסכום יזנק ב-7.3%
to conclude:
Rent control should not intimidate you. You have a product that the state needs but cannot fill in the demand. I strongly suggest to think about the long term and not just the immediate term.
Foinsí:
https://www.globes.co.il/news/article.aspx?did=1001247625
https://www.ynet.co.il/articles/0,7340,L-5457729,00.html
https://www.theguardian.com/…/google-abandons-berlin-base-a…
http://www.businessfondue.com/…/why-romania-is-a-nation-of…/
https://qz.com/…/germany-has-one-of-the-worlds-lowest-home…/
Freagraí