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| - Germany's top property group Vonovia said Tuesday it will sell around 20,000 apartments to the city of Berlin and limit rent increases in the capital following a planned 19-billion-euro merger with rival Deutsche Wohnen. "The people of this city are not happy with our companies and the current state of the housing market, so we need a new start," said Vonovia CEO Rolf Buch at a joint press conference with Berlin mayor Michael Mueller. In a move which Mueller called "hugely significant", Vonovia and Deutsche Wohnen pledged to limit rent hikes until 2026 in Berlin, which has been hit for years by runaway prices and a lack of affordable housing. Vonovia said it had agreed to cap rent increases at one percent per year in the next three years, and also offer the city government 20,000 apartments. The merger, announced late Monday, comes in the midst of a fierce ideological battle over housing in the German capital. The local Berlin government's flagship rent freeze policy was recently thrown out by Germany's highest court, while tens of thousands have signed a petition to expropriate assets from major property companies. Finance Minister Olaf Scholz, the centre-left Social Democrats' candidate to succeed Chancellor Angela Merkel later this year, said the planned mega-merger highlighted the need to put "protection for renters at the top of the agenda". To shield tenants from rising rents "a rent moratorium will be needed over the next few years", Scholz told the Handelsblatt financial daily. In Germany, where a majority of residents are renters, Deutsche Wohnen and Vonovia play a premier role in the housing sector. Vonovia has 10 percent of its portfolio in Berlin alone, while Deutsche Wohnen is by far the city's biggest player with 70 percent of its properties in the capital. The merger between the two companies will give birth to a real estate giant owning more than 500,000 homes in Europe. The proposed deal comes after two previous attempts failed to come off, the last having been rejected by Deutsche Wohnen in 2016. Vonovia's latest offer of 53.03 euros per share sent Deutsche Wohnen shares soaring on Tuesday, adding almost 16 percent to reach 52.06 euros as trading closed in Frankfurt. Deutsche Wohnen shareholders will be offered 52 euros in cash and the rest as the company's dividend for the 2020 financial year, said the statement. The previous purchase offer in 2016 saw Deutsche Wohnen oppose the merger, saying the proposed price was too low. kih/mfp/tgb
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