Berlin Property Market Is Soaring!

Berlin Property Market Is Soaring!

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Almost alone in Europe, Germany is economically in good shape and solvent.  Almost alone in Europe, Berlin’s property market is on the up, with the result – probably also unique in Europe – that the number of squatters in the city is actually decreasing.

Berlin isn’t a success story within Germany, on paper at least.  Unemployment in Berlin runs at twice the national average of 6.8%, and there are relatively few employers.  The city has nevertheless spent the last three and a half years building itself up into the go-to destination for Europeans.  Wealthy Germans used to go to Greece, Spain and Italy; now wealthy Greeks, Spaniards and Italians are coming to Germany.

They’re fleeing the economic woes of their own countries, and they’re contributing to a spike so sharp – 17% in a year that George Soros is worried about a bubble.  There’s a particularly high demand for luxury apartments in Berlin.  New builds are more likely to feature modernist architecture and designer interiors than to be family homes or affordable housing.  Those Greeks, Spaniards and Italians have helped push up prices and rents to the point that Berliners are protesting in the streets, to the chant of ‘nicht Ihre Prozent auf unsere Miete!’ – ‘don’t make your percent off our rent!’

Berlin’s population, much like that of any capital city, comes largely from outside.  The city’s been swelled in recent years by professionals, young creative types and entrepreneurs with an eye to emerging technologies, and prices and rents reflect this mix.  Rent on a Berlin apartment typically runs at 5% annualized return, and prices for residential property have risen by 31% in the last five years, according to property broker ImmobilienScout 24.  US corporations are moving their property investment money to Berlin, to capitalize on a market that’s low but shows strong promise.

In the process, the culture and atmosphere of Berlin is changing.  Berlin has a long history of being the place for arty Europeans to go, especially Germans, and has caught all those who might have gone to Paris if they could afford it.  Now they can’t afford Berlin either.  Berlin has no concentration of industries or banks, as London or Paris does.  As a result, claims Steffen Sebastian, head of the Real Estate Institute at the University of Regensburg, Berlin apartments are overvalued already.

A sign of the end of an era, as much as the renovation of any Dockland warehouse, is what’s happening to Tacheles.  Tacheles is German for ‘Straight Talk.’  It’s Berliner for a building in the now-fashionable Mitte area of the city which used to hose a department store.  For more than twenty years now, it’s housed a collective of artists who squatted there to work and live.  They were evicted a fortnight ago.

‘This part of Berlin doesn’t interest us anymore,’ said one of the squatters, Reiter, as bailiffs supervised the eviction of the collective to make way for developers.  But it’s also true that Reiter and those like him no longer interest Mitte.  It’s gone from a post war bombsite – old Red Berlin, with extra bullet holes and rubble – to an upmarket German analogue of London’s East End.  Gentrification, identified as ‘capitalist coup’ by Reiter and characterised by him by ’boutiques and restaurants,’ has set in.  George Soros, speaking in Berlin on September 10, seemed to agree, albeit in a different language.  He warned his audience of a bubble and said the Berlin market had a lot to do with the flight of capital and negative real interest rates.

Photo Credits: Piano Light