Private Wealth | The traffic light and real estate

"They always say that political stock markets have short legs.That may be true - but when it comes to the real estate market, political changes can have very long legs. That's why I took a closer look at the plans of the traffic light coalition," explains Michael Reiss.

The real estate professional's first impression: "It could have been worse. The fact that neither tax increases nor stricter regulations are planned is a good sign. Germany was almost in danger of slipping off the radar, especially for international investors."

Reiss also welcomes the campaign for affordable and sustainable construction. If we really succeed in creating 400,000 apartments every year as planned, that would be a new record for our country.

However, according to Reiss, a lack of living space has been a burning issue for a very long time. "Municipalities and cities have not come any closer to their goal of eliminating this problem for decades - I am curious to see how this is supposed to work now."

Reiss believes that more government cannot be the solution. "The state economy does not work more efficiently than the private sector." If many large residential portfolios are managed by the state in the future, it is also questionable whether maintenance tasks will be optimally fulfilled. "Private owners are more interested in keeping their properties fit and modernizing them."

Michael Reiss therefore advocates strengthening the private real estate sector. "The task for the future is to make building and investing in real estate easier and more attractive, instead of putting obstacles in the way of investors. Without incentives and subsidies through new depreciation models, I don't see how the traffic light could achieve its ambitious goals."

The plans to reduce bureaucracy and standardization are therefore very positive. "Until now, approval procedures have often taken 1.5 years or longer. This is a major hurdle that makes life difficult for investors and developers."

Further steps would have to follow. "Munich, for example, has the problem that there is hardly any free space available for development. The city would have to grow outwards beyond the city limits or upwards."

Outward growth would mean investment in infrastructure. And growth in height would require greater approval from the population. "Creating living space doesn't just require individual measures, but a concept for society as a whole," explains Reiss.

These measures are all the more important as the traffic lights are also sending clear signals in terms of rent increases. "There is a very clear political goal of keeping rents within limits. Property owners can therefore not expect increases to be enforceable in conurbations."

This will make the yield calculation even more ambitious. "After the enormous price increases, yields are already very unattractive in many areas. This will not change in the long term."

And then Michael Reiss refers to a kind of sword of Damocles. Before the election, there was much discussion about abolishing the tax exemption for capital gains after the ten-year period. There is no longer any talk of this. "But that wouldn't be a tax increase, just the removal of a benefit," Reiss remains suspicious. If this topic were to return to the agenda, it would send a fatal signal. "There is now a chance for a new beginning," concludes Michael Reiss: "It is all the more important to refrain from doing anything that undermines investor confidence in the German market."