Wednesday, April 9, 2014

The Topic of Reasonable Rent

Back around July of last year when I arrived in Wiesbaden....I made a long walk down near river, and came across a ghetto-style apartment building, in bad shape, and a moving truck or two out front.  Some minor renovation starting up.

To sum it up....the building looked like crap, and I doubt if anyone in the building was paying more than 400 euro a month ($500 roughly).

This past week, I made the same walk, and came across the building in massive renovation efforts.  From the street, it's really looking appealing.  It's down in the Mainz-Kastel part of town....barely five hundred feet from the river, and maybe six minutes walking to the Mainz-Kastel train station.  Prime real estate.....after it's fixed.

So, this ties into a recent topic of discussion in Germany.....affordable apartments.  For several years, and maybe going back to the 1990s....apartment buildings of the 1950s and 1960s.....in major urban areas like Frankfurt, Berlin, Stuttgart, Mainz, etc.....are being bought for a low price because they haven't been renovated in all those years.  The rent situation?  Stagnant....because of the "look".

So guys with money got smart.   Buy the property for the lesser sum....borrow money to massively renovate it.....and throw the rent at 2.5 to 3.5 times the current value.  Naturally, the old residents can't handle that....so they move out.

What we have developing here....is a marginal income part of society....who are screwed.  They didn't buy property in their 20s/30s.....so now at age fifty....their intention is to rent for the rest of their lives, and they simply can't afford 1,500 to 2,000 Euro a month on rent.  Why would you pass up an investment opportunity like this?

What made all of this interesting.....was that no one was renovating the properties for decades.  They are all low-valued, in neighborhoods near mass transit, and potential gold-mines.

The social side of the argument is....lack of fairness.  How can you drive up the rent like this?  It gives the marginal folks in society no chance to find good apartments for what they make or what the welfare guys pay.

Rent control?  Well....it's a hot topic that folks hate to bring up.  If you go this direction....it means absolutely no renovations for decades.  You end up with ghetto-like neighborhoods (yeah, even in Germany, we have such areas).

This place in Kastel?  Well, I'd take a humble guess that the rent is a minimum of 1,000 Euro a month now.  Toss in the ease to the train station, on the main bus line.....and the safe neighborhood factor....it's worth that much and more.  Could a regular guy afford that much on rent?  A thousand Euro would be a tough stretch for a regular guy.....maybe if both husband and wife work....it's well within their abilities.

New apartment construction?  You can drive around and note various properties being in some phase of construction.  Most don't fit the angle of cheap affordable living.  There's plenty of discussion going on with the future and how this might all come together.  From an American prospective.....all of this is simply pushing the lower wage earners out of the bigger urban areas....to small towns.  That's the only way that I see this going for the foreseeable future.

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