(Bloomberg) -- Berlin's imminent five-year rent freeze is no solution for booming Lisbon, left scarred by underinvestment in its buildings after the city pursued a similar policy, Portuguese Prime Minister Antonio Costa said.
Home prices in the Portuguese capital have doubled since 2012, when the previous administration eased long-held rent controls. The restrictions discouraged owners from improving their properties, and critics of Berlin's clampdown on landlords claim the same thing will happen there.
“We've had this experience of freezing rents during 40 years, and it's a very bad solution for the preservation and renovation of the city,” Costa, a former Lisbon mayor, said in an interview at the premier's palace in the capital. “We need to manage the market to avoid speculative movements, but there are tools other than a freeze. Perhaps in Berlin it's a good solution.”
Costa is instead ending the practice of granting “golden visas” to foreigners for property purchases in Lisbon and the northern city of Porto. Investors have pumped 4.5 billion euros ($4.9 billion) into real estate since the program began in 2012, led by Chinese buyers. That's helped turn Portugal into western Europe's second-hottest property market.
Meanwhile, Berlin's legislature in January backed measures including the rent freeze to ease the burden on tenants after an influx of property investors and a rising population created a shortage of affordable homes. The changes will likely come into force by the end of this month, though opposition parties have signaled their intention to challenge them in court.
“Here it's a very sensitive matter,” Costa said, noting there's a difference between freezing for four years or 40 years. “We need to give confidence to the owners, to the market.” Lisbon moved “very fast” from a market that was too regulated to a completely liberalized market, the premier said.
Read more: No City Hates Landlords Like an Increasingly Radical Berlin Does
“We need to understand what's happening now in the real estate market,” Costa said. “With interest rates so low, real estate is the refuge market for investors. Not only in Berlin, in Lisbon, it's a global problem in all cities in the world.
--With assistance from Henrique Almeida.
To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net
To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Andrew Blackman, Stefan Nicola
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