Berlin rent controls will work, says investment firm

Despite a recently introduced rent cap, the rental sector in Berlin will remain profitable for landlords and investors, according to Property Frontiers. 

Berlin is the first city in Germany to introduce a cap on what landlords can charge new tenants. 

Landlords in the German capital are now limited to raise rents by no more than 10% above the local market average; a cap that was already in place for existing tenants but, under the new rules, has been extended to new tenants too.

International agency Jones Lang LaSalle reported that between 2013 and 2014, rents in Berlin increased by more than 9%. 

This is comparable with the situation in London, where just this week agents Your Move and Reeds Rains reported that average rents in the capital are currently growing at a rate of 10.2%.

With concern among landlords over the introduction of rent controls, investment firm Property Frontiers has given five reasons why the new rules in Berlin will work for landlords as well as tenants. 

The first benefit, it says, is that tenants will stay in rented property for longer thanks to increased security that rents will not rise too steeply. This will in turn decrease landlords' unprofitable void periods. The firm highlights that this scenario also eliminates the cost and hassle associated with finding new tenants every so often. 

Secondly, Property Frontiers draws attention to the fact that landlords in Berlin will be restricted to 20% rental increases within three years, which could in fact represent quite a substantial gain if pushed to the limit. 

Its next observation is that new build properties are excluded from the rent cap and that many property investors in the German capital are now turning their attentions to apartments in new developments to maintain a profitable rental income.  

Property Frontiers also says that the demand for rental property in the city remains extremely high while there is also a shortage of properties available. Jones Lang LaSalle says that there will be at least 20,000 new apartments required each year for the next few years in order to meet demand – which presents increased opportunities for investors.

The firm's final reason for suggesting the rent cap will be a success is that it will keep tenants living in the city as they will not be forced out by unaffordable living costs. 

It concludes by saying that the rent cap will maintain a healthy rental market and should not have a dampening effect on new build properties.

It will be interesting to see how the introduction of rent controls take shape in Berlin as politicians in England continue to argue that they should be introduced here. 

Just this week Labour's candidate to replace Boris Johnson as London Mayor, Sadiq Khan, outlined his housing policies which included a call for the power to limit or freeze rent rises in the private sector.