Berlin resi landlord ADO plays down city's rent freeze

Berlin-focused residential landlord ADO Properties predicts a rent cap coming into effect in the German capital city from next year will not damage the company's long-term prospects.

The listed investor has a portfolio of assets in the city valued at €4.4 bn and saw rental growth of 9.9% in the first half of 2019. But from 2020 it will be forbidden by law to raise rents by more than 50 cents per square metre, for five years.

The planned rent freeze in Berlin is being implemented to halt the march of gentrification which critics say is making the city unaffordable, after rents rose by 50% since 2011.

Pressure by citizens has led to the cap on rent increases by the local government, which is proving unpopular with investors facing diminished returns. In Q2 of this year, the market value of Germany’s 60 listed landlords dropped by 7% – the poorest performance in Europe – according to Bloomberg.

But ADO predicts long-term investors such as itself will ultimately benefit from the freeze, in comments accompanying its financial results for H1 2019.

‘The current political situation has led to a considerable amount of unrest in the real estate sector,’  said Ran Laufer, CEO of ADO Properties.

‘We view the proposed Berliner Mietendeckel [rent cap] quite sceptically and we believe that it or something similar can only contribute to a further shortage of apartments in Berlin. However, this should please investors, who in the long term almost certainly stand to benefit from such conditions,’ he noted.

Up to 1.5 million units in Berlin will be affected by the freeze in rents, according to the left-leaning Berlin government responsible for the scheme. German chancellor Angela Merkel greeted the measure with scepticism, citing the risk it will deter developers from building new homes.

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