Shares in German residential property groups headed for their biggest two-day fall in a decade, with Berlin’s biggest listed landlord particularly feeling the heat, after the capital moved one step closer to imposing a five-year rent-freeze proposal.
The fear of a political ban on raising home rents rose on Friday when Katrin Lompscher, the Berlin senator for urban development and housing, signed the final draft of the rent ceiling proposal, or Mietendeckel.
By mid afternoon, Deutsche Wohnen was heading for a 14 per cent drop over Thursday and Friday trading in Frankfurt. If sustained, that would mark the residential housing group’s biggest two-day decline since May 2009, during the financial crisis that hammered property stocks worldwide. Since that period, when it was trading at about €2.66, the stock has risen steadily to a high struck in March this year of €44.83. It was recently trading at €36.67.
Deutsche Wohnen, according to brokerage research, takes about three-quarters of its rental income from Berlin. A cap would cut its funds from operations by between €15m and €17m in the first year, or 3 per cent of the total, London-based Kepler Cheuvreux forecast recently.
Vonovia, Germany’s largest residential property group, has fallen 4.5 per cent over the same period, while Luxembourg-based Grand City Properties, which holds real estate predominantly in Germany, has dropped 6.3 per cent. These two landlords take 10 per cent and 14 per cent respectively of their rental income from Berlin, Kepler Cheuvreux said.
“A historical moment,” Ms Lompscher said on Twitter, with a picture of her and Sebastian Scheel, secretary of state, signing the document. “It is now going blow by blow so that the important law can be decided quickly,” a translated version of her tweet said.
On the Twitter feed of the senate department for urban development and housing, it cites an interview with Ms Lompscher saying that rents will be frozen for five years.
The proposal is due to go to the senate before the summer break, said Berliner Morgenpost this week, and will be enforced from 2020. New-build apartments that have not yet been let and social housing are not included, the Berlin daily said.
Property in Germany’s capital city has become an attractive asset and foreign money has poured in. Gentrification is pushing up rents and squeezing out low-income families. Rents for vacant flats rose 12 per cent in 2017, the Berlin Tenants’ Association said, reaching a record of €10.15 per square metre. Property prices in the city rose by more than a fifth in the same year, according to Knight Frank.
Deutsche Wohnen, the third-largest listed real estate company in Europe in terms of market capitalisation, has a property portfolio with a value of about €22bn that includes more than 167,000 residential and commercial units. Its portfolio includes nursing homes and serviced apartments. It has been listed on the Frankfurt stock exchange for 20 years and owns property that includes four Unesco World Heritage sites, such as one in the shape of a horseshoe estate built more than 90 years ago.
The company was the biggest faller on Europe’s benchmark Stoxx 600 on Thursday in response to the proposal from Ms Lompscher, in which she argued for steep landlord fines of up to €500,000 and said tenants should have the right to take rent adjustments to court.