Germany is the leader when it comes to investments by listed real estate companies in the European rental housing market. As recently as 2013, the total market value of tradable shares in this sector was €5 billion. This year, that has grown to €52 billion. From abroad, this thriving rental housing market is viewed with envy. This success is partly due to the highly regulated and privatised rental market.
Regulation and privatisation
The relatively strict regulations on the rental market make German housing attractive to investors. Because renters can live affordably, they are less likely to buy a house. Compared to other European countries, people in Germany spend little on rent. In Germany, an average of 20% of net income is spent on this. Partly because of this, more than half of the approximately 42 million housing units in Germany are rental properties. A large proportion is privately owned. Just under 1 million of the rental properties are owned by listed funds.
German tenants also tend to stay in the same place for a long time, 10 years on average. If a tenant stays longer, they are protected from rent increases by imposed rules. If a tenant enters into a new contract, there is also rent protection, but the rent will rise more sharply. The long-term contracts offer housing investors a stable income, which is attractive to investors.
Privatisation also plays a role in the strong interest in German rental housing. At the turn of the century, German housing associations sold a large part of their property. Also, many homes that companies had for their employees ended up on the market. This resulted in a very sizeable market for investors.
Despite regulation, talks about rising rents in big cities like Berlin are the order of the day. This is because Germany is also facing a housing shortage and the number of forced evictions is rising. About 400,000 additional homes are needed in Germany every year, and less than 300,000 are delivered every year.
Homes in Berlin - Photo: Adrian Trinkaus
And in the Netherlands?
In the Netherlands, around 43% of the total housing stock consists of rental housing. A whopping 69% of these are owned by housing associations. The Netherlands also has rent protection. For instance, rental properties falling below the liberalisation threshold have a maximum rent determined by means of a point system. However, this does not apply to rental properties with a rent above the liberalisation limit of €710.68. In Amsterdam and Utrecht, for instance, this allows rental houses to be rented out at the highest price in the free sector. In recent years, interest in rental properties in the Netherlands has risen sharply. Partly due to factors such as rent protection and the tightness in the housing market, there is also an attractive risk-return profile here.