The influence of state regulation on the development of real estate prices
Explain the policy response in macroeconomic terms. Specifically, how might the policy affect the total demand for bonds in the country? Describe the shifts that may occur.On June 1, 2015, the law on rent control for new or follow-on leases for residential properties came into force in Germany. It intends to cap the rent at the conclusion of a lease at a maximum of ten percent above the local comparative rent. New buildings and extensively renovated apartments are excluded. In the short term, many landlords raised rents to the maximum permitted, which led to an immediate increase in rents. Others sold because they saw their returns at risk.
This tightened the rental housing market, causing rents to rise further due to scarcity. With the higher rent, the return on investment for property owners also increased and properties became more expensive. Since November 1, 2020, the Building Energy Act (GEG) has been in force in Germany to achieve the 2030 climate targets. As a result, property owners are forced to invest in their buildings. This also causes rents and real estate prices to rise. I would like to show that any state intervention in the real estate market has negative consequences for tenants or buyers.
