Influence of money laundering on real estate prices and rents in Germany

Influence of money laundering on real estate prices and rents in Germany

According to a report by www.fr.de,

Real estate prices and rents in Germany are rising again, especially in large cities such as Hamburg, Cologne and Berlin. One reason for this is money laundering, which has a significant impact on the market. According to the German Economic Institute (IW), rental prices in some areas have doubled in the last 15 years and purchase prices have even tripled. Criminal gangs use real estate to clean up illegal money and estimate around 100 billion euros annually in Germany. This leads to up to 30 percent of dirty money being invested in real estate, which drives up prices and ultimately affects all citizens.

The impact of money laundering on property prices is controversial, but experts agree that a large proportion of illegal money is invested in houses. Criminals can manipulate prices, especially in dynamic market situations and not for standard objects. This artificial increase in the price of real estate has an impact on rents, as expensive properties push up the rent index.

Furthermore, Russian oligarchs, for example, buy noble real estate in Berlin in order to launder money from dubious sources. The exact amount of money laundering and its impact on real estate prices is difficult to estimate. For example, the police know that profits from the cocaine market are around three billion euros, but there are no concrete figures for other areas. The number of unreported cases is large and professional money laundering has barely been recorded, which is estimated to have a single-digit percentage impact on the real estate market.

In Germany, it is difficult to arrest owners of money laundering properties because a concrete initial suspicion is required. There are growing calls for an authority to ex officio check dormant capital for suspicious reasons. Paradoxically, money laundering is an economic factor in Germany and, although it causes massive damage, it also benefits some circles. The fight against money laundering and its influence on the real estate market are therefore of great importance for the industry.