Frankfurt, Munich. A central election promise of the Left in Berlin is taking shape: the socialization of large housing companies could become a reality under a government led by the Greens and the SPD. The project also confirms a joint exploratory paper by the three parties. Socialization would be a unique measure in Germany.
Since the Berlin election, many economists and real estate professionals have been warning about the negative consequences for the real estate market. Given the plans, the affected Swedish real estate group Heimstaden currently no longer believes it is possible to invest in Germany at all.
But does a possible socialization actually deter landlords and investors in advance? The Handelsblatt asked experts, brokers and managers whether the first effects were already evident.
Berlin's plans to socialize large housing groups are causing increasing nervousness in the capital's real estate market. So far, the three parties' exploratory paper has revealed the following: In the German capital, private landlords who own more than 10,000 apartments should be forced to transfer their holdings above this threshold into public ownership. The compensation should be limited to 16 billion euros. The law is planned for 2028 and implementation for the following year.
It will therefore take some time before the law can be implemented. But the current debate already seems to be having consequences, especially among international financial investors. Konstantin Lüttger, co-head of the real estate service provider Newmark for housing market investments in Germany, says: “Capital is shy.” And adds: “The uncertainty is correspondingly great.”
He describes that there are both private and institutional investors who are expressly looking for opportunities in Berlin. They assumed that the socialization plans would ultimately fail. “We are also receiving feedback from some large investors that they are currently no longer interested in investing in the Berlin housing market,” the professional completes the current picture.
Carsten Loll, real estate lawyer at the international business law firm Latham & Watkins, also reports mixed reactions from foreign investors: “Some believe that the socialization plans will ultimately fail and therefore want to continue investing,” he says. But “another part is unsettled.” Loll primarily advises foreign financial investors and private equity companies.
The Swedish home stadium Bostad is already openly turning its back on Berlin. Christian Fladeland, co-chairman of the Swedes, said in an interview with the Bloomberg news agency a few days ago: "Of course I believe that you can't invest in Germany if you make laws like that."
The major investor Meag from Munich is also relatively open about his reservations towards the capital. Stefan Haas, who is responsible for real estate on the Meag board, says: The asset manager of the reinsurer Munich Re can still imagine investments in apartments at selected locations in Germany. “However, if we had the choice to buy somewhere other than Berlin, all other things being equal, then we would do it there,” he emphasizes.
Jürgen Michael Schick, one of the major brokers of rental properties in Berlin, also senses how some of his customers are reacting to the current situation with concern. The broker and honorary president of the IVD real estate association fears: No matter who will be affected, the climate for investments will be permanently worsened by expropriations.
But it's not just the large housing companies that are reacting. In fact, Berlin real estate agent David Gramzow also observes: “The uncertainty among private landlords is noticeably increasing.”
Many smaller owners have already been startled by the property tax reform and unexpected letters from the tax office. The current political debate probably increases their concerns.
In fact, most private landlords have little to fear legally. The discussed threshold of 10,000 apartments ensures this. Even large private portfolio holders are generally not affected. Broker Gramzow still believes it is conceivable that larger apartment owners will increasingly sell apartment buildings that have already been divided into condominiums individually. The additional supply could then put pressure on purchase prices.
According to the survey, no general decline in demand in Berlin has been observed so far. The Haus & Grund owners' association says that this cannot currently be proven on a numerical basis. However, it is important for Kai Warnecke, President of Haus & Grund Germany, to point out: “In the consultations, however, we realize that the political developments in Berlin are causing concern among private owners and prospective buyers.”
Nevertheless, interest in buying remains high, especially for owner-occupied apartments, says Gramzow. “If the price is right, a sale can happen relatively quickly today,” he says. The ongoing shortage of rental apartments in the capital also contributes to this.
Gesa Crockford, managing director of the real estate portal Immoscout24, is therefore looking further ahead: “The real danger lies not in short-term market reactions, but in the fact that the apartments of tomorrow will not be built.” Because too little new living space increases competition in demand.
It is therefore of particular interest how the market develops for new construction projects. Simon Dietzfelbinger, partner and head of residential properties at the consulting firm Drees & Sommer, knows: “Our customers are particularly concerned about the planned increase in the proportion of rent-controlled apartments.”
“Possible higher rates of rent-controlled apartments and further regulatory steps are already leading to investors and project developers putting projects on hold,” he warns. If this trend consolidates, there is a risk of a decline in new construction activity in the short and medium term.
The assessments of the experts and managers in the Handelsblatt survey paint a differentiated picture: While the market for owner-occupied apartments has so far remained largely unimpressed, uncertainty is growing among investors.
Among international investors, the political debate is already having an impact on the willingness to invest new capital in the Berlin housing market. It is still unclear whether this will lead to a permanent withdrawal or whether investors will only act temporarily cautiously.
Reiner Braun, CEO of the real estate consulting company Empirica, is hoping for a reversal of state policy: “At some point the politicians on the left will also begin to do the math and realize that expropriations cannot be financed.” Haus-&-Grund President Warnecke warns emphatically: “With the socialization plans, Berlin is losing the trust of the owners on whom the city depends.”
