2020-12-12 | Rent cap and Corona crisis – What are the implications for residential real estate financing?
16th Live Event | Meet the expert
Real estate talk with financing expert Martin Bonnet on the topic “Rent cap and Corona crisis – What are the implications for residential property financing?”
Topic: After the rent cap turned the Berlin real estate market upside down, the Corona crisis and especially the second hard shutdown continues to exert additional pressure. In our live chat, we analyzed what impact this is having on real estate financing in Germany and how you can recognize independent financing advice.
About the Expert: Mr. Martin Bonnet has been working as a financing consultant for real estate loans in Berlin for more than 20 years now. In addition to traditional German real estate buyers, he also serves buyers from abroad who would like to finance a property in Germany. In the course of the time he supported many hundreds of customers on their way to get finance for a property. Be it the classic single-family home, the condominium or the multi-family house for asset accumulation. Developer financing, interim financing and complex financing cases also occurred more frequently during this time.
More information can be found at: https://berlinfinance.eu/
Your summary for 2020, Mr. Bonnet?
My summary for 2020 is that there are and can always be external factors over which we personally have no influence, but which in turn can have a strong influence on the financing world. In such cases, flexibility is required, ideas are needed and this year, even more than usual, it was necessary to understand and respond to customer wishes. It has meant responding to individual client needs and spending more work and time to answer the comprehensive questions. In addition, the Corona protection measures and processing of Corona aid have slowed down the work in the banks, such as the processing of financing applications.
Were the effects of the rent cap noticeable in your daily business?
Whenever it came to capital investments and explicitly to non-residents for tax purposes, the rent cap had a strong influence on the banks’ willingness to finance. The possible impact of the rent cap on bank loans led some investors to look for a new location for their investments.
What are the possible effects of Corona on the real estate market and financing conditions?
At this point, we can only make assumptions. Basically, a low interest rate policy favors tangible assets such as real estate in terms of price development. If this policy continues into an inflationary phase, or even before that a strongly deflationary phase, then we could see fluctuations on all markets, including the real estate market, that we have not seen in this way in recent decades.
The Corona crisis has led to a situation where those responsible, i.e. above all the governments, but also the central banks, have intensified the policy they have been pursuing since the financial crisis of 2008-2009. In this respect, Corona has had an accelerating effect.
What advice do you have for owner-occupiers?
As a tenant of a flat, one must bear in mind that if inflation were to occur, it could drive up rents. On the other hand, owners who use their flat themselves are protected from these rising rents.
How do tax non-residents view the market?
Above all, foreign taxpayers see the market with two eyes. On the one hand, Germany is still lagging behind in property price development compared to other countries, such as Great Britain, and is therefore interesting for investors. On the other hand, they find a “regulatory frenzy” in Germany. Currently, many investors already prefer other locations in Germany to Berlin because of the rent cap. If these regulations continue to spread within Germany, they might also say goodbye to the German housing market altogether. This would also have a bad effect on the market, because investors create living space. They buy properties in order to rent them out on the market.
Should I sell my empty flat in Berlin or rent it out again?
There is something to be said for selling the flat, for example to a buyer who will use it himself. Many Black Label clients who, as investors, own a flat that has exceeded the 10-year speculation period, now sell it as an empty flat and take advantage of the price increase. Re-letting makes sense if you want to keep the property for a long time. However, you should carefully consider whether you want to continue investing in such a regulated market as the Berlin housing market.