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[BERLIN] Germany's lower house of parliament passed a law on Thursday to limit rent rises in metropolitan areas to 10 per cent above local averages when properties change hands, in a bid to stop tenants being priced out of the market.
Rents have shot up by as much as 30 or 40 per cent since 2007 in cities such as Berlin, Hamburg, Munich and Frankfurt.
The rises have had a particularly big impact in Germany where nearly half the population lives in rented accommodation. Home ownership at just 46 per cent is the second lowest in Europe after Switzerland.
"It's a good day for the German tenant," said Justice Minister Heiko Mass, a Social Democrat. Around five million properties will be affected by the new rules, he said.
The rent cap was originally proposed by the centre-left Social Democrats before the 2013 election and later adopted by Chancellor Angela Merkel's conservatives.
The new law will only apply to areas where the housing market is particularly tight. In addition, landlords or the person who engages the broker will have to pay the broker's fee rather than the tenant - a charge sometimes as high as two months' rent.
German real estate company Deutsche Wohnen has criticised the cap, saying the new rules will discourage investment and exacerbate a housing shortage in big cities.
The opposition Greens and Left party have also complained that the proposal has too many exemptions, including one that excludes properties built after Oct 1, 2014 and buildings that have been thoroughly renovated.
The new rules will be debated by the upper house of parliament on March 27 and could come into law from April.