Berlin property investors remain confident despite vote

If institutional property investors were spooked by the stunning "yes" vote in Berlin's expropriation referendum on Sunday, they had a funny way of showing it.

On the same day that more than 1 million Berlin voters endorsed the proposal that around 230,000 properties should be forcibly brought into public ownership, the Swedish institutional real estate company Heimstaden Bostad announced a bumper new deal in the German capital.

It has just bought 28,776 homes in Germany, Sweden and Denmark from its rival Akelius, with 14,050 of them "centrally located" in Berlin. The firm also announced its first move into the Hamburg market, snapping up 3,592 homes there. There was no mention of the referendum in its press release.

The company's CEO, Patrik Hall, told DW via email that it was not a deliberate move to announce the deal on the same day as the referendum. "When everything is agreed and signed, we have to — due to stock exchange regulations — communicate the purchase immediately," he said. "So, it is almost impossible in such a process to plan the day to publish."

However, he said the company was glad if the timing of the announcement gave an impression of confidence.

"We are very happy if the timing gives the appreciation that we have a confidence in the Berlin market, because that is also true," he said.

Conciliatory words

Other large Berlin property investors had their own positive news in the wake of the referendum. The day after the poll, Vonovia revealed it had acquired more than 50% of its rival Deutsche Wohnen's share capital. That paves the way for Germany's two biggest real estate companies to merge and create an institutional investor behemoth in the process.

Vonovia's official response to the referendum result was somewhat conciliatory though. "In the new legislative period, we'll need far more mutual engagement than confrontation," the company's CEO, Rolf Buch, said. "Vonovia is ready to work closely with a new state government and the key social stakeholders in Berlin, so that together we can handle the challenges of the city's housing market."

Hall also spoke of the need to listen to voters. "Despite the results from the referendum, we have made a long-term commitment to Berlin and all our tenants," he told DW. "We also see the referendum as a clear signal from the Berlin people to politicians and the housing industry to do things better. We gladly accept this mandate and will play a role in the important issue of new housing construction and tenant-friendly solutions and services in the housing market."

Both companies would be massively affected if a law based on the referendum were to be drafted in Berlin. Their apparent openness for "mutual engagement" is part of a clear trend. Earlier this month, Deutsche Wohnen sold 10,700 homes back to the city of Berlin for €1.65 billion ($1.93 billion), as part of its "Future and Social Housing Pact" with Vonovia.

Political pressure; legal and financial scrutiny

Nonetheless, a huge chasm exists between their position and those who voted to expropriate. There is now great uncertainty about what will happen next.

The pressure is already on the politicians. The SPD's Franziska Giffey, who is set to become the new Berlin mayor, spoke out against expropriation during the election campaign. But on Monday, she said the result had to be respected and conceded a bill would have to be drafted.

However, she cautioned that it would need to be both legally and financially watertight — something that many experts believe is impossible to achieve.

Jakob Hans Hien, a lawyer at Knauthe, one of Berlin's leading real estate law firms, believes the strength of the "yes" vote will force the city to examine a possible law. However, he firmly believes that any expert legal reports the city commission will find the proposal to be unconstitutional.

"In particular, a general link to a minimum of 3,000 apartments and compensation 'well below the market value' would be unconstitutional," he told DW, referring to the referendum's wording around how property owners would be compensated in the event of expropriation.

"The question of how the measure should be financed will also have to be examined. Here it becomes clear that an implementation of the law would lead to intolerable financial risks for the city of Berlin," he said.

Ending the crisis?

For the "DW und Co. Enteignen" (Expropriate Deutsche Wohnen and Co.) movement, there is joy at the referendum result. They also remain firm in their conviction that expropriation is the only goal in sight.

"We do not accept delaying strategies or attempts to intercept them. We know all the tricks," Kalle Kunkel, a spokesman for the initiative, said. "We will not give up until the socialization of housing groups has been implemented."

They firmly believe the law is on their side, pointing to the never-before-used Article 15 of Germany's Basic Law.

Those on the other side of the issue see the vote more as a catalyst for nuanced policy change, rather than a clear point on the road towards expropriation.

"The Berlin housing market as a whole has disappointed many people, especially since too few new homes have been built," says Hall. "But now it is time to look to the future and work together with politicians, the local community, tenants and companies to create housing and take people's concerns seriously."

Hien has a similar view. "My hope is that the private real estate industry and the new government will sit down at the table and work out a long-term concept for orderly urban development in Berlin," he said. "An expropriation can — and should — then be dispensed with. Otherwise, there is a risk of protracted legal disputes that will only harm the tenants in this city and not help."