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GERMANY: Bavaria to step up fight against property misuse

15 March, 2017

The two major parties in Bavaria’s state parliament, the SPD and the CSU, have both published draft legislation to prohibit the commercial use of residential property in Germany without prior consent. The two draft laws are extremely similar, and both seek to add clarity to the term “misuse of property” (Zweckentfremdung).


 
According to the CSU’s proposal, this would include all apartments that are made unsuitable for residential purposes following redevelopment, and those which are kept vacant for more than three months. In contrast, the SPD wants to limit rentals to tourists to a maximum of six weeks per year.
The SPD also wants to limit the rents charged for short-term rentals to a maximum of 15% above local comparable rents. In addition, letting agents, housing administrators and internet platforms such as Airbnb would be required to keep local zoning authorities informed about the utilization of the properties they list and manage.
Violations of the regulations could result in fines of up to EUR 500,000, a tenfold increase on the current maximum of EUR 50,000. In serious instances, the SPD suggests that a property should be temporarily seized and forcibly leased by a trustee. The CSU plans to submit its draft law to the state parliament before the end of the month, and hopes that it will become law in June.
Meanwhile, according to Frankfurt’s Land and Property Valuation Committee, real estate transactions in the city totalled EUR 6.7 billion in 2016, the second highest transaction volume ever recorded.
The average square meter price for a new-build condominium has now risen to EUR 4,930, a year-on-year increase of 13%. Across all age categories, the square meter price for residential property rose to an average of EUR 3,940, or 6% above 2015’s figure. Around 30% of all new-build condominiums developed in 2016 were in residential towers.
Frankfurt’s Land and Property Valuation Committee dismissed the widespread claim that these expensive apartments are being developed as speculative investment objects for international investors. In fact, 81% of those buying apartments in high-rise developments are German residents, and almost half already live in Frankfurt.
According to bulwiengesa’s Price and Rent Index, the German residential segment’s 5.5% increase in 2016 (following 4.8% growth in 2015) is yet again responsible for ensuring that the overall index gained ground. This is the strongest result since German reunification and was largely driven by substantial price growth in the new-build terraced house (+ 7.5%) and new-build apartment (+ 7.3%) segments.
Property and rental prices rose in a majority of the 125 cities included in bulwiengesa’s index. The price of development land for private homes was up by a moderate 3.6%. In contrast, in the commercial property sector (office and retail), price increases were limited to Germany’s Top Seven cities, and even then only in relation to office rents and land zoned for commercial property development.
Office rents in A cities added 4.6%, compared with just 1.1 to 1.4% in smaller cities. Rents for retail properties stagnated in prime retail locations in Germany’s pedestrianized shopping areas (+ 0.1%), while an increase of 0.4% was reported in secondary locations. The commercial property subindex developed weakly in 2016, rising by just 1.8% (2015: 2.6%). For 2017, bulwiengesa expects property prices to continue to develop independently of rental prices. Overall, the German real estate market index rose by 4.2%.

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