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Tuesday, June 16, 2015

Rent controls - a German warning

Thankfully the threat of rent controls have rescinded in the immediate term with the 2 Eds being kicked into the political wilderness.....shame!

The reality is that the threat of rent control is never far away.  To see the effect on landlords and the rental market we only have to look to landlords in Berlin in Germany.  Here we have a bureaucrats charter with a new law preventing landlords from demanding more than 10% more than the area average.  The rules rely on a much disputed index called he Mietspiegel.

The new rules apply the rent controls to new tenancies and Berlin landlords are up in arms.  Landlords  are looking at changing these rules in the short-term.  The real impact of rent controls can not be seen in the short-term; which is why opportunistic politicians love it to a deliver cheap political fix to disaffected 'generation rent'.  The real results can only be observed in the long-term.  For this you just have to look to another European country, Portugal.  Here is what happens over the long-term when rent controls takes hold.

I feel landlords had a close call with the last general election.  But mark my words....the pressure for rent control will re-surface at some stage in the future so lets not become complacent.

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