Mr. Schlüter, you work as a Transaction Manager at W&W Real Estate, a company that has so far been involved in real estate transactions valued at more than 2,2 billion euros. The company has been the exclusive partner of ADO Properties for the past 14 years; otherwise, they are primarily aimed at foreign investors. How do you currently see the Berlin real estate market? Specifically about the rent cap: does it affect your customers' investment decisions? If yes, which?
The political situation in Berlin in relation to the housing market certainly does not allow a decision for large-scale investments for some investors. On the one hand, we have investors who argue that the political issues that are currently being negotiated are not sustainable in this way or that they will only survive for a few years. The length of their business plans allows for a certain serenity.
But that's definitely not the majority. For other investors, we feel a certain amount of uncertainty, triggered by the topic "rental cover", that is correct.
These investors are currently on the waiting track until the risk of their planned investments in Berlin becomes calculable.
I think it is currently hard to convince anyone to invest in one of Europe's hottest cities, which is being upset by politics despite growth and low European rents. Berlin clearly loses its appeal - at least in the past.
The rental price brake 2015 was already a clear regulatory intervention. Why are the current plans perceived so differently?
You are right, but at that time it was possible for the owners to fulfill the expected return expectations by investing in their holdings and then revaluing the property. The current plans do not allow this anymore. I do not think owners will be great at investing or modernizing their own holdings, as they do not have much output from them. In the long run, the condition of real estate and housing will see a significant devaluation, which is a warning signal to both owners and investors.
What effects do you see from the renewed relaxation of the monetary policy of the ECB?
In my opinion, a possible increase in interest rates will be postponed further into the future through new bond purchases. When monetary policy eases, however, I think the timing is important. This plays a central role in topics such as Brexit.
Europe, but above all Great Britain, would be in a risky position in the ECB's early decisions, depending on how hard Brexit is. Accordingly, the economic impact can be significantly greater.
How do you expect the Berlin real estate market to develop over the next 5 years?
I think that under the current policy environment, the condominium market will heat up significantly, because the ETW business is a safe business for real estate companies today. The prices for empty units will increase enormously due to the lack of living space and missing alternatives.
The issue of "capping rents" ensures that the real estate sector around portfolio holders maneuvers into a kind of stagnation. A stoppage that poses a great risk to all participants in this industry under the conditions currently being discussed.
Through the mentioned rent cover, which is to freeze the rents for the next 5 years, we are advised in the situation that under the "cheap rents" even more people want to move to Berlin, whereby the demand increases and the supply is even more scarce becomes.
What would you say would be different?
In my opinion, the city of Berlin should not try to address the problem of housing shortages in Berlin by means of regulatory intervention. The fact is that Berlin lacks at least 100.000 apartments. This issue is not resolved by a rental cover or other interventions. On average, 40.000 people move to Berlin every year, but currently there is hardly any vacancy.
The decline in building permits should also worry policy. As long as the city does not create new living space, or allows the market participants, who have made the topic of new construction to the primary task, to build quickly and without perpetual approval procedures and conditions, the housing market situation in Berlin will remain tense.
Mr Schlüter, thank you very much for taking the time to talk to me.