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PROPERTY

Explained: Who are Blackstone and what do they want with Denmark’s rental properties?

Why is the American firm so interested in rental housing in Copenhagen and why are Denmark’s housing regulations encouraging them?

Published: 15 January 2020 18:46 CET
Explained: Who are Blackstone and what do they want with Denmark's rental properties?
Photo: Thomas Lekfeldt/Ritzau Scanpix

Blackstone is an American equity fund that is among the largest in the world with assets of approximately $3,600 billion.

The company was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman.

Schwarzman is currently chairman of Blackstone’s board of directors. He has a fortune of over $90 billion and is on Forbes list of the 100 richest people in the world. The billionaire has been voted by Bloomberg financial media several times to be among the 50 most influential people in the world.

Headquartered in New York City, Blackstone has offices all over the world, including in London, Paris, Dublin, Sydney, Tokyo, Hong Kong, Singapore and Beijing.

In addition to real estate investments, the equity firm has invested heavily in companies including, Hilton Worldwide, Merlin Entertainments Group, Performance Food Group and EQ Office.

Section 5, part 2 of Denmark’s Housing Regulations Act (boligreguleringsloven) – now often termed the ‘Blackstone Paragraph’ has become the focus criticism of all landlords – not just big companies like Blackstone — who make money by renovating older properties and raising rents.

The clause allows landlords to significantly raise rents if they spend around 250,000 kroner renovating housing after a previous tenant has moved out.

As such, the landlord can effectively move their rental property out of restrictive housing regulations so that it becomes encompassed by freer rules. This means that the home can then be rented out according to the value of the property, which in most cases is significantly higher than the previous, cost-determined rent.

However, this option does not exist for apartments in properties with six or fewer homes, as they are covered by a different section of the Housing Regulations Act.

Kereby announced on Tuesday that it is to limit how much it will cost to live homes it has renovated according to section 5.2.

Typically, the limit will be at 1,650 kroner square metre per, meaning a 90-square-metre apartment would cost around 12,375 kroner per month.

However, some cheaper apartments cost only 750 kroner per square meter. That applies primarily to apartments that were renovated a long time ago or are in less popular locations.

Although the company has now promised to lower rents in some homes, DR has reported that Kereby, Blackstone’s Danish arm, is involved in a number of disputes over rent that are being processed the Rent Appeals Board (Huslejenævnet) in Copenhagen.

The boards resolve disputes between tenants and landlords, and the broadcaster has previously reported that the company loses many of the cases that go to the appeals board.

LLO regional director Claus Højte told Politiken that he saw Blackstone's surprising move as “on initial impressions, beautiful and an example to others in the industry”.

But he also stressed that tenants who have received offers of cheaper rent should be cautious.

“Right now we have 51 cases against Kereby/Blackstone with the Rent Appeals Board [Danish: Huslejenævnet, ed.], and in several of them they have wanted to settle on lower rents, but we think their offers are still too high,” Højte said.

“If you as a tenant say yes to the rent that Kereby/Blackstone is offering now, you might be prevented from getting an even lower rent,” he explained.

In addition to modifications to its rental prices, Kereby has also said it will make other changes, including training and development of its employees to ensure good customer service for tenants.

Sources: Politiken, DR, Reuters, Wikipedia, Blackstone, Bloomberg, Forbes.

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PROPERTY

Why buying property in Austria remains unaffordable for most

Buying a home in Austria is a dream for many international residents, but it remains out of reach for the average earner.

Published: 7 May 2024 12:30 CEST
Why buying property in Austria remains unaffordable for most

Many people living in Austria dream of one day owning a home, but despite recent drops in property prices and interest rates, this dream is still out of reach for many average earners. 

In Austria, it is recommended to not spend more than 40 percent of a monthly income on debt repayment.

But new analysis by tariff comparison portal durchblicker.at reveals that even a double-income household would need to spend around 60 percent of their income to afford a 90m² new-build apartment in Vienna.

While the government has created initiatives to improve the affordability, with attractive housing packages, fee reductions and eliminations of certain fees, such as the “Grundbucheintragsgebühr” (land register entry fee) and “Pfandrechtseintragungsgebühr” (mortgage registration fee) for properties up to a certain value, their impact has been limited.

Furthermore, the governments initiatives often overlook the specific needs of lower-income households and may benefit those who are already financially stable, leaving the average earner still struggling to afford a home, according to Der Standard.

READ ALSO: ‘Haushaltsversicherung’ – How does Austria’s home insurance work?

High prices, rates and strict lending criteria

One of the biggest barriers to owning a home in Austria is simply the sky-high property prices. Over the years, property prices have increased, making it more difficult for people with an average income to afford a place of their own. Even with recent minor dips in prices, they still remain high.

Another factor making owning a home challenging is the increase in interest rates in recent years. As a result, both existing variable-rate loans and newly obtained fixed-rate loans have become more expensive. Analysts expect the European Central Bank to cut interest rates by around 0.5 percent in the near future, but according to durchblicker’s calculations, this would initially only create a little relief for loan takers, where instead of around 60 percent, 55 percent of monthly household net income would be needed for debt repayment.

Another issue preventing many from realising their dream to buy a home is the difficulty in obtaining a mortgage. Since July 2022, stricter rules have applied in Austria for the granting of property loans. Loan applicants must have a deposit worth at least 20 percent of the value of their property to be granted a loan, according to the financial online platform Finanz.at. This means that even applicants with higher incomes may struggle to get their dream financed. 

Furthermore, many loan takers with variable-rate loans, especially those recently obtained, are facing significant challenges. The variable interest rates have increased significantly since the initiation of these loans, resulting in higher monthly repayments, reported Der Standard.

Few people can afford their own home in Austria, especially in Vienna. Photo by Christian Lendl on Unsplash

Experts suggests fixed rate loans and cooperative housing models

Andreas Ederer, Head of Banking at durchblicker.at, recommends loan takers with variable-rate loans to change to fixed-rate loans. He suggests that fixed-rate loans have become more attractive as they are currently cheaper than variable-rate loans, reported Kurier. 

Unlike fixed-rate loans, which have a steady interest rate throughout the loan term, variable-rate loans can change over time in response to shifts in market conditions or the economy.

Experts also suggest alternative models for increasing affordability. One idea is to create more opportunities for cooperative ownership with mandatory purchase options. This could offer a more affordable option where costs such as maintenance and taxes are shared. According to Der Standard, cooperatives also often have access to loans with better terms.

READ NEXT: How can I move into affordable cooperative housing in Vienna?

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