September 5, 2018 / 11:14 AM / 10 months ago

German cabinet approves bill to tighten rent rise curbs

FILE PHOTO: Luxury housing development is pictured at East Side Gallery in former east Berlin, Germany August 27, 2016. REUTERS/Stefanie Loos/File Photo

BERLIN (Reuters) - Germany’s cabinet approved a bill on Wednesday to strengthen curbs on steep rent increases in big cities that are hurting tenants and raising concerns that the property market may be overheating.

Justice Minister Katarina Barley, who introduced the legislation, said in a statement that it would allow new tenants to know how much former occupants of a property had paid in rent and whether renovation work justified any increases.

The law was already changed in 2015 to tackle soaring property prices and rents. This introduced a “rent price brake” for new tenants in densely populated areas, banning increases to more than 10 percent of local average rents.

Landlords can seek exemptions in some cases, such as for a new or recently renovated buildings.

Barley’s new bill, which now goes to parliament, obliges landlords to reveal unprompted whether they have benefited from rent price brake exemptions in the past and how much the previous rent for the property was.

An influx of people to German cities and a shortage of available housing has pushed up rents. Cities with the highest average rents include Munich, Cologne, Stuttgart, Hamburg, Frankfurt and Berlin.

The Bundesbank has warned that real estate prices in German cities may be 15 to 30 percent overvalued, hinting that a property bubble may be developing, a potential risk for financial stability.

Reporting by Riham Alkousaa, Editing by Tassilo Hummel and David Stamp

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