Investors rush to cash in on Germany’s broken resi planning laws

It's a simple case of supply and demand, wrapped in politics

From back: Charlize Theron in "Atomic Blonde;" Berlin. (Credit: BagoGames Flickr; Pixabay)
From back: Charlize Theron in "Atomic Blonde;" Berlin. (Credit: BagoGames Flickr; Pixabay)

Housing prices in Germany seem to be going nowhere but up.

Here’s the situation: a shortage of land and skilled construction workers, in combination with strict energy rules and requirements for accompanying facilities like schools alongside developments, have kept a number of new housing projects from getting built in major cities across Germany due to costs. At the same time, an influx of German retirees and young professionals, both local and from abroad, are driving demand for housing through the roof, which means prices are skyrocketing, but legislative relief via existing planning laws is at least six years away, according to the Wall Street Journal.

As a result, last year prices in major cities like Berlin rose a national average of 10 percent while many investors saw their portfolios increase in value by 40 percent and a record of more than $19 billion in investment poured in.

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With most of Germany’s urban residents renting, not owning, in markets devoid of options, rents in Berlin climbed 9 percent last year. Over the past decade, in Frankfurt’s median rent grew by 44 percent while in Munich the median rent is now 60 percent higher than it was in 2008.

The hot housing markets are piquing the interest of investors, particularly those from the UK, but local investors are preaching caution.

“You can still make stupid deals in Berlin if you don’t know the market,” investment strategist Jörg Schwagenscheidt told the Journal.

And government intervention is looming: Chancellor Angela Merkel’s recently formed coalition government as well as local lawmakers have promised to intervene to protect tenants from ever-increasing rents. [WSJ]Erin Hudson