Deregulation must be priority for new German government

Germany may have the strongest economy in Europe but it is not without its challenges and, post crisis, a need to develop more quickly is one of them. Paul Strohm reports.

Deregulation, including simplification of the planning regime, should one of the priorities for Germany’s incoming government experts agreed at the recent German Market Outlook Briefing.

The event, staged in Frankfurt and online was the first face-to-face event staged by Real Asset Media since the onset of the pandemic.

As the markets pick up the pieces in the wake of the ongoing health crisis and, in Germany’s case, the damage caused by recent flooding, obtaining consent to start development work more quickly is essential, panellists concurred.

Pecan Developments’ managing director Marcus Brod said that considerable change is needed to speed up the building permit and zoning process. “We really need to cut down on all those very time-consuming steps,” he said, explaining that obtaining a zoning plan for a housing development recently took his company two and a half years. “That’s just too long, it’s really got to improve,” he said, adding that it is both costly and time consuming to obtain such consents.

Political initiatives add regulation

Matthias Meckert, head of legal, PGIM Real Estate, Germany, added that all political initiatives ultimately end up with additional regulations. “This makes us nervous. For the transformation into a carbon neutral environment we need a lot of capital, a lot of innovation and a lot of technology changes and obviously regulation is hindering that.”

Meckert said that PGIM likes the European regulation on ESG – namely SFDR – but said the “gold plating” of those regulations by Bafin, Germany’s federal financial authority, makes him “happy that all my structures are based in London or Luxembourg”. “Here, there’s unfortunately too much regulation and too little change towards less bureaucracy, actually freeing up the market,” he added.

‘As an industry we have to think what do the customers, the people using the space, actually need and want.’

Carsten Loll, Linklaters

Marcus Cieleback, chief urban economist, Patrizia Immobilien, said that for many politicians regulation is an escape route that enables them to do something without spending a lot of money.

“Implementing new regulation is easy, but eradicating the old one at the same time is a necessary thing and the second part is often missing,” he said.

“Possibly the new regulation has a good intention, but as we don’t eradicate the old structures we get an even more complicated way forward than we had before.”

And he said that it is not always well understood how regulations interact. “We have put in so much new regulation over the last five to eight years, but do we really know how they interact in a situation of crisis or stress.”

While the experts generally accepted that change is needed, it is likely to be hard to achieve within one electoral term pointed out Ingo Glaeser, head of commercial real estate finance Germany at Münchener Hypothekenbank.

“The German society, the German economy, it’s like a container ship at full steam – it’s very difficult to change direction significantly so you will probably need more than four years,” Glaeser said.