James Carthew: Phoenix Spree’s collapse serves warning on rent controls
The winding-down trust’s rise and fall reveals how well-intentioned rent controls can actually worsen a housing crisis
About 20 years ago, there was a flurry of new issues of investment companies investing in German residential property. German property prices had fallen in the 1990s when others were rising, making it an attractive investment area. Between 1990 and 2007, inflation-adjusted German prices fell by 14%.
Understandably, property values there looked a lot cheaper than their UK counterparts, so cheap in fact that it made no sense to build new houses as the cost of construction was above market values. That constrained supply, which meant rental yields were fairly attractive. It was also easy to get finance to gear these funds up to boost the yield to UK investors even further.
Then the global financial crisis (GFC) hit and suddenly all that borrowing did not look too clever. This subsector of the investment companies market shrank almost as quickly as it had grown.
However, in 2015, there was an IPO of a ‘new’ German residential property fund – Phoenix Spree Deutschland (PSDL). It was actually a survivor of the GFC, having been launched back in 2007.
Fast forward a decade and the £137m residential property trust is in wind down and trading on a 37.9% discount…. read more here
