The German court ended the heyday of real estate managers - News of international financial, securities and currency markets

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The German court ended the heyday of real estate managers

Is the German Constitutional Court just killing the goose laying the golden eggs?

Today, investors and a handful of housing real estate managers may think so, after the Court ruling upheld the federal government's regulations on increasing rental limits. This ruling threatens a business model that has been very successful in the past decade, in which companies like Vonovia (DE: VNAn) and Deutsche Wohnen (DE: DWNG) have used extremely low borrowing costs in the cities like Berlin, upgrading old buildings and then raising rents to a high level - far beyond the ability of old tenants to pay.

Vonovia shares fell 1.8% on the news, to its lowest level in seven weeks, while Deutsche Wohnen fell 1.7% to its lowest level since early 2017. Deutsche Wohnen, the main business enterprise in Berlin, where the issue of tenancy is the most serious, has lost nearly a third of its value since the spring, when the City Senate, run by the two main leftist parties and the Green Party ( The Greens, has launched their own new plans to control rent more closely.

LEG Immobilien (DE: LEGn) and Immobilien Tag (DE: TEGG), two real estate stocks, fell 2.4% and 1.6%, respectively.

The Constitutional Court's ruling addressed another federal government initiative, but the initiative set a precursor to establishing a system of principles, putting social works on on property ownership to request market-oriented pricing for their assets. That may make it harder for Deutsche Wohnen and Vonovia to challenge any harsh plan issued by the Berlin City Senate.

"This is for the common good to direct against the deportation of" poor "population groups from popular neighborhoods," the court explained its intervention in the field of ownership, a whole. The rule that the German constitution often protects strongly.

The federal government's "rental ceiling" limits the rental price by up to 10% from the local reference price that comes from the current rental rate, but allows some exceptions if built and new recovery. Last weekend, a federal government committee agreed in principle to extend the regulation until 2025.

Today in Europe, trading markets fluctuated in thin volume, due to weak economic prospects and political instability that prevented markets in the continent from rising after the Wall Street rally wave. Monday and overnight from Asian markets. The Euro Stoxx 600 benchmark score fell below 0.1% to 373.56. Germany's Dax index fell by a similar amount while the FTSE 100 index increased by 0.3%. In Italy, the FTSE MIB dropped significantly compared to other European markets, down 0.6% amid expectations that Prime Minister Giuseppe Conte will resign later in the day, causing a breakdown of the existing alliance. at and may lead to new elections in the next few months

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