Pension fund buys german apartments: the business with higher rents

The Danish pension fund PFA is buying 3,700 apartments in Germany for one billion euros. This is to be profitable through expensive new rentals.

Rental houses in Hamburg. Here, too, the Danes have bought apartments Photo: dpa

The Danish pension fund PFA is buying into the German real estate market on a grand scale. According to a report in Handelsblatt, PFA is taking over a portfolio of 3,700 apartments in 15 locations in Germany. More than half of the rental income will be generated in Munich and Berlin. Other portfolios are located in Dusseldorf as well as in Hamburg, Stuttgart and the Rhineland. The pension fund is paying a total of over 1 billion euros for these. This is the largest residential real estate investment in Germany so far this year.

The seller is Industria Wohnen. The PFA is now relying primarily on rent increases from new leases when existing tenants move out: For new leases, the price in Munich is now 18 euros per square meter, for old leases 10.

The purchase demonstrates Germany’s undiminished attractiveness as a real estate location, even for international investors – and is proof of the lack of tenant protection. The previous rent brake, which allows an increase of the rent paid to date by a maximum of 10 percent, has proved largely ineffective. An improved version has been agreed in the coalition agreement between the CDU/CSU and the Social Democrats. However, a first draft from the SPD-led Ministry of Justice has so far failed due to opposition from the CDU/CSU.

At the same time, the sale to PFA denies the spring 2018 report of the real estate lobby association ZIA. It said that the "eight-year-long rise in purchase prices and rents" in Berlin, Munich and Stuttgart "should soon come to an end.

While the tenant protection rules are making little headway, the grand coalition is now looking at better regulations for home and apartment buyers, which were not even agreed in the coalition agreement: Katarina Barley’s Ministry of Justice is currently examining whether buyers of apartments and houses can be exempted from brokerage fees in the future. The costs are to be shifted to the sellers of the apartments.

Bernhard Daldrup, SPD

"Land transfer tax, broker, notary and land registry costs now account for 15 percent of the actual purchase price"

The SPD’s housing policy spokesman, Bernhard Daldrup, also supports this plan: "Land transfer tax, broker, notary and land registry costs now account for 15 percent of the actual purchase price," he said. "This makes ancillary construction costs one of the decisive price drivers for housing."

The Greens had already submitted a motion in July to extend the so-called buyer principle, which already applies to renting, to the purchase of residential property. The Left Party also supports this idea, while the CDU/CSU and FDP were initially skeptical. They are calling for exemptions from land transfer tax. Before the summer break, the coalition had already passed the "Baukindergeld" – another measure to encourage home ownership. The state uses it to subsidize families in the purchase of houses and residential property.

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