Despite the pandemic that has gripped the world for 17 months, creating an unprecedented economic crisis, there’s been a seemingly endless upwards trajectory in property prices.
 
In the EU, average house prices jumped by 5.5% last year –which is almost the same in scale as the 6.2% fall in GDP that the bloc’s economy suffered due to the pandemic.
 
The German capital is no exception, with Berlin property prices surging over the last 12 months.
 
Much of the inflows into the city in recent years have come from foreign investors, including legendary multi-billionaire investor Warren Buffet.
 
One of the major drivers of this investment from overseas has been the fact that Berlin’s highly controversial rent cap was overturned by Germany’s constitutional court in Karlsruhe, ruling it was unconstitutional, and therefore null and void.
 
The city’s rent cap prevented owners of flats built before 2014 charging more than what had been agreed in June 2019.
 
It also demanded that any rents that were 20% in excess of acceptable levels should be reduced, varying according to location and quality. Landlords who did not adhere to the new law faced heavy penalties. The policy was meant to be in place for five years. 
 
But this is now all over in what has been dubbed by the media as a “victory for landlords.”  Indeed, there’s no doubt the ruling is likely to mean a major windfall for landlords as rents are instantly raised by hundreds of euros a month.

In addition, according to a report in The Guardian, “Landlords are also entitled to demand back-payments on previously frozen rents. Countless evictions now loom for tenants facing significant arrears.”
 
There has been significant opposition by tenants, as you would expect, to the decision, with tens of thousands out on the streets in protest.
 
However, opponents of rent control insist any restriction on housing profitability forces landlords out of business or limits housing supply; that lower rental income will be passed on to tenants in the form of reduced maintenance and overall housing quality; and that regulating the property prices is anti-free market.
 
It’s a policy that is set to continue to invite controversy, but there can be no denying that it has made the ever lively and dynamic German capital an even more attractive proposition for overseas buyers.