US investor plans to buy Dresden public housing
10 March 2006, DRESDEN - A US investor signalled Friday that it planned to step up its purchase of properties in Germany after it agreed to pay 1.7 billion euros (two billion dollars) for all the public housing owned by the city of Dresden.
10 March 2006
DRESDEN - A US investor signalled Friday that it planned to step up its purchase of properties in Germany after it agreed to pay 1.7 billion euros (two billion dollars) for all the public housing owned by the city of Dresden.
Faced with crippling debts, Dresden became the first German city to offload its entire public housing portfolio after the local assembly approved the deal Thursday.
The move to sell off of the 48,000 city-owned home units has led to a highly charged debate about the future of both public housing in Germany and the nation's once generous social state as foreign investors have sought to carve out new empires in the nation's real estate market.
"Dresden has the chance to become the first big German city to be free of debt," said Dresden Mayor Ingolf Rossberg after the sale.
Indeed, the sale by the Dresden property authorities group Woba to the German offshoot of US investor Fortress is likely to trigger a series of sales by cash-starved cities across Europe's biggest economy.
This includes Hamburg and Cologne. Germany's capital, Berlin, which is grappling with debts totalling 30 billion euros, has already begun selling off part of its public housing stock in a bid to knock the city's state finances into shape.
Two years ago the Berlin city authorities sold off 65,000 apartments to a foreign investor for about 400 million euros.
Fortress said it has already paid out a total of 10 billion euros for property including 160,000 apartments in Germany over the last two years.
Matthias Moser, the chief of the group's German operations said Fortress was considering further property purchases in the nation's east. But he declined to spell out any details.
Dresden city's sale of its housing stock, much of which dates back to its former communist days, will effectively wipe out the city's accumulated debts of 741.4 million euros.
But with large part of the housing sold in Dresden and earmarked for sale in other cities currently occupied by people on low-incomes, the push to dispose of the public real estate stock has fuelled fears among tenants of a hike in rents.
The Dresden city authorities pressed on with the sale despite a petition containing 45,000 signatures from people opposed to the move.
Germany's tenants association has forecast an annual four per cent rise in rents at properties that have been transferred into the hands of private investors.
The housing sale by Dresden was both "wrong and shortsighted" said the association's director Franz-Georg Rips.
However, encouraged by a corporate tax break in Germany, the investors argue that their plans are to renovate the properties and to attract more tenants to the buildings many of which have been run down over the years.
"We want to reduce the vacancy rate (currently 18 per cent)," said Fortress' Moser. "Raising rents would not help this."
With large numbers of people having left the economically hard- pressed eastern part of Germany in search of jobs in the west, vast tracts of both privately and publicly owned housing have remained empty for years.
In a bid to head off concerns about rent hikes, Fortress Deutschland has also ruled out major rent rises for the next ten years.
Subject: German news