Real estate trends. With the traffic light coalition, the course on the real estate market is also being set anew. Michael Reiss, Managing Partner of Sotheby's International Realty in Munich, explains what investors should now expect.

"It's always said that political exchanges have short legs.That may be true - but when it comes to the real estate market, political changes can have very long legs. That's why I took a closer look at the plans of the traffic light coalition," explains Michael Reiss.

The first impression of the real estate professional: "It could have been worse. The fact that neither tax increases nor stricter regulations are planned is a good signal. Especially with international investors, Germany was almost in danger of slipping off the radar."

Reiss also welcomes the offensive for affordable and sustainable construction. If it really succeeded in creating 400000 apartments every year as planned, that would be a new record for our country.

However, according to Reiss, a lack of living space has been a burning issue for a very long time. "Communities and cities haven't gotten closer to their goal of addressing this shortfall in decades - I'm curious how that's going to work now."

More government, Reiss believes, cannot be the solution. "Government economics just don't work more efficiently than private economics." If many large housing portfolios are managed by the state in the future, it is also questionable whether maintenance tasks will be fulfilled optimally, he said. "Private owners are more interested in keeping their properties fit and modernizing them."

Michael Reiss therefore advocates strengthening the private real estate sector. "The task for the future is to make building and investing in real estate easier and more attractive, instead of putting obstacles in the way of the investor. Without incentives and subsidies through new depreciation models, I don't see how the traffic lights could achieve their ambitious goals."

The plans for debureaucratization and standardization are therefore very positive, he said. "Until now, approval procedures often take 1.5 years or longer. This is a major hurdle that makes life difficult for investors and developers."

Further steps would have to follow. "Munich, for example, has the problem that there is hardly any vacant land left for development. The city would have to grow outwards beyond the city limits or upwards."

Outward would mean investment in infrastructure. And growth in height would require greater popular support. "Creating housing just doesn't need individual measures, it needs a whole-of-society approach," Reiss explains.

These measures are all the more important, he says, because the traffic lights are also sending clear signals about rent increases. "There is a very clear political goal to keep rents in check. Owners cannot therefore expect increases to be enforceable in conurbations."

He added that this makes the yield calculation even more ambitious. "After the huge price increases, yields in many areas are already very unattractive. This will not change in perspective."

And then Michael Reiss points to another sword of Damocles of sorts. Before the election, there was a lot of talk about abolishing the tax exemption on capital gains after the ten-year period. True, there's no talk of that now. "But that would not be a tax increase, just the removal of a benefit," Reiss remains suspicious. If this topic would come back on the agenda, this would be a fatal signal. "There is now a chance for a departure," concludes Michael Reiss: "It is all the more important to refrain from anything that undermines investor confidence in the German market."

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Munich | Sotheby's International Realty Michael Reiss; 49 (89) 744 24 18 90

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