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Berlin 'considers' banning foreign buyers to counter house price rises

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Berlin 'considers' banning foreign buyers to counter house price rises
Jens Kalaene/ DPA
17:46 CEST+02:00
Concerns about rising residential and commercial rents are increasingly familiar in Berlin, while the cost of buying a home is fast moving beyond the reach of many. In response, the Berlin Senate is considering taking a leaf out of New Zealand’s book - by forbidding foreigners from purchasing property in the city.
The statistics are difficult to dispute. In the last ten years, prices have doubled all across the German capital. Despite some of the most comprehensive rental protections seen in major European cities, long-term Berliners are being forced out as property prices have skyrocketed. 
 
Berlin Mayor Michael Müller has said the city was considering implementing the seemingly drastic step taken by New Zealand authorities in banning non-residents from purchasing property. 
 
“The Senator for Finance is working on proposals to prevent housing speculation. We are taking a constructive and flexible approach”, Müller told the Frankfurter Allgemeine Zeitung. 
 
The issue of rising rents has become one of the most controversial ones in the German capital, attracting regular protests and encouraging residents to call for greater restrictions
 
As it currently stands, there are few restrictions on purchasing property – regardless of whether the purchaser is a resident of Berlin or not – while rent increases are capped at ten percent per year. 
 
In New Zealand, restrictions have been put in place after the average rent across the country increased by almost double over the past eight years. The plan will see non-residents prohibited from buying property all across the country, although the prohibition will not apply to Australians. 
 
Australia and New Zealand are subject to a number of trade and partnership agreements, thereby preventing authorities from putting in place significant restrictions. Similar limitations apply in Berlin, where European Union law is likely to prevent the restrictions from being applied to EU members. 
 
With American, Israeli and Russian investors however making a significant impact on the property market, the law would still potentially impact a large amount of foreign investment capital.
 
Despite the consensus on reducing house prices, the idea hasn't won widespread support just yet. Both the CDU and the Greens – strange bedfellows at the best of times – have argued against the rule, saying it it would be difficult to implement and would result in an increase of fraudulent "straw men", i.e German residents buying property on behalf of others.
 
The German property system does not employ a central real state register, meaning that it is difficult to determine the actual owner of a property with any degree of certainty. 
 
Reiner Braun, of the independent social science consultancy the Empirica Institut, echoes these concerns. He argues that the primary reason for rental and property price increases is not foreign buyers but a lack of supply in a city which welcomes 40,000 new residents each year
 
“It doesn't solve the problem and it is not a good plan. Behind the plan is the idea that foreigners are wicked or nasty landlords because they increase rents, fail to renovate and leave flats empty (to increase prices),” Braun said. 
 
“Whether that's true or not (in some cases), they could still always buy apartments through middlemen – while if we have more German ‘wicked or nasty' landlords, it still doesn't fix the problem.
 
“The way to beat the problem rather than just the symptoms is to eliminate the scarcity of homes (in Berlin). We must build 25,000 new homes per year, more than the 15,000 we currently build – all of which need to be served by good public transport connections,” Braun said. 
 
While the Mayor's office has not yet set a date for the release of the proposals, regardless of the end result it seems that after decades of upheaval, Berlin's ‘poor but sexy' days are numbered. 
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