Berlin's 5-year rent freeze is cold comfort for Lisbon

Lisbon

BERLIN'S imminent five-year rent freeze is no solution for booming Lisbon, left scarred by underinvestment in its buildings after the city pursued a similar policy, said Portuguese Prime Minister Antonio Costa.

Home prices in the Portuguese capital have doubled since 2012, when the previous administration eased long-held rent controls.

The restrictions discouraged owners from improving their properties, and critics of Berlin's clampdown on landlords claim the same thing will happen there.

"We have had this experience of freezing rents during 40 years, and it's a very bad solution for the preservation and renovation of the city," Mr Costa, a former Lisbon mayor, said in an interview at the premier's palace in the capital. "We need to manage the market to avoid speculative movements, but there are tools other than a freeze. Perhaps in Berlin it's a good solution."

He is instead ending the practice of granting "golden visas" to foreigners for property purchases in Lisbon and the northern city of Porto.

Investors have pumped 4.5 billion euros (S$6.78 billion) into real estate since the programme began in 2012, led by Chinese buyers.

That has helped turn Portugal into western Europe's second-hottest property market.

Meanwhile, Berlin's legislature in January backed measures including the rent freeze to ease the burden on tenants after an influx of property investors and a rising population created a shortage of affordable homes.

The changes will likely come into force by the end of this month, though opposition parties have signalled their intention to challenge them in court.

"Here it's a very sensitive matter," Mr Costa said, noting there is a difference between freezing for four years or 40 years. "We need to give confidence to the owners, to the market."

Lisbon moved "very fast" from a market that was too regulated to a completely liberalised market, the premier said.

"With interest rates so low, real estate is the refuge market for investors," he said. "Not only in Berlin, in Lisbon, it's a global problem in all cities in the world." BLOOMBERG