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Berlin rent freeze forces its largest landlord to build elsewhere

Berlin

A PLAN to freeze rents in Berlin is already taking a toll on the German capital's biggest residential landlord.

Deutsche Wohnen, which has questioned the legality of the measure, said that it will postpone new construction projects in Berlin and focus on other cities.

The company also said that its inability to raise rents significantly, combined with potential mandated rent reductions, presents a risk to cash flow of as much as 330 million euros (S$494 million) over five years.

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Berlin's governing parties last month struck a deal to freeze rents for five years in an effort to tackle surging housing costs.

The measures, among the most radical announced by any city, are expected to come into force in the first quarter of next year.

The uncertainty caused by the plan has prompted Deutsche Wohnen to review almost one billion euros worth of renovation work and investments in new Berlin homes, the company said. It has also earmarked as many as 5,000 Berlin properties for disposal.

On Tuesday, it was announced that Deutsche Wohnen would buy back about 7 per cent of its shares for as much as 750 million euros.

The shares have lost around a fifth of their value since the measures against landlords were first mooted.

"Rent reductions and unrealised rental growth might be claimed back from tenants in case of a final court ruling of non-constitutionality of the proposed law," the company said. Around 70 per cent of its apartments are in Berlin. BLOOMBERG