Private Wealth | The traffic light and the property

“It is always said that political stock exchanges are short-lived. That may be so – but when it comes to the real estate market, political changes can get pretty long legs. That’s why I took a closer look at the traffic light coalition’s plans,” 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. Especially with international investors, Germany was almost in danger of slipping off the radar.”

Reiss also welcomes the offensive for affordable and sustainable construction. If it were really possible to create 400,000 apartments every year as planned, that would be a new record for our country.

According to Reiss, a lack of living space has been a burning issue for a long time. “Municipalities and cities have not come any closer to their goal of eliminating this grievance for decades – I’m curious to see how this is supposed to work now.”

Reiss believes that more government cannot be the solution. “The state economy just doesn’t work more efficiently than the private sector.” If many large residential portfolios were managed by the state in the future, it was also questionable whether maintenance tasks would be carried out optimally. “Private owners are more interested in keeping their properties fit and modernizing them.”

Michael Reiss therefore advocates strengthening the private real estate industry. “The task for the future is to make building and investing in real estate easier and more attractive instead of putting obstacles in the investor’s way. Without incentives and funding 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 often took 1.5 years or longer. This is a major hurdle that makes life difficult for investors and property developers.”

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

Outward would mean investment in infrastructure. And growth upwards requires greater approval from the population. “Creating living space does not require individual measures, but a concept for society as a whole,” explains Reiss.

These measures are all the more important because the traffic light also sends clear signals when it comes to rent increases. “There is a very clear political goal of keeping rents within limits. Owners can therefore not count on increases being enforceable in conurbations.”

This makes the return calculation even more ambitious. “After the enormous price increases, returns in many areas are already very unattractive. This will not change in the future.”

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. Nothing more is heard of that now. “But that wouldn’t be a tax increase, just the cancellation of a benefit,” Reiss remains suspicious. If this topic were to be put back on the agenda, it would be a fatal signal. “There is now a chance for a new start,” concludes Michael Reiss: “It is all the more important to refrain from anything that undermines investor confidence in the German market.”