Berlin's zeitgeist driving a hyperactive real estate market
BERLIN -- A glimpse of this city's real estate pages suggests that just about anything is for sale: A Brit is turning a former Hitler Youth headquarters into a luxury club, Americans have bought up swaths of former Communist-era apartment buildings, a German company has transformed a red-brick prison into condominiums, and owners of rooftop flats have never been coyer.
"The scent is out to buy in Berlin," said Hans Peter Plettner, chief of a property auctioning company. "The real estate prices in the city are lower than in Budapest and Prague. That's strange but true. Berlin is being marketed and it's on everyone's tongue. It's the talk of the West."
Hipper and less expensive than Paris and Rome, and the capital of Europe's economic power, Berlin is attracting investors from around the world.
Commercial, industrial, and residential sales revenue jumped 58 percent from 2005 to 2006, from $12 billion to $19 billion. The number of property purchasing contracts rose from 18,000 in 2004 to 27,000 last year.
Speculators from Ireland, Scandinavia, Britain, France, Russia, and the United States have been drawn by low-interest loans, generous tax incentives, and property rates that can be about half the price of those in other European capitals. Investors are also betting that as the European Union expands east, Berlin will become an important arts and business center.
There are the annoying facts of the city's high unemployment and huge debt, but Berlin's image as a cultural and party haven has, at least for now, more verve than its rather dismaying bottom line.
"Berlin moved into international focus over the last 10 years, but we've had hyperactivity in the last two years," said Sebastian Kohlmeyer, a fashion designer-turned-real estate agent. "Berlin is a city always on the move. It wants to be something, but it's really not searching for a definition. It offers a kind of anarchy that dares you to do things you might not dare to do in other cities."
No longer divided, Berlin emerged from the Cold War as a place that held a fascination for bohemians looking for cheap digs. The Love Parade, a clamor of techno-pop and hedonism, added a risqué marketing twist; neighborhoods such as Mitte became the domains of expatriates from Stockholm to Des Moines.
In 1999, Berlin once again became the German capital, elbowing aside staid Bonn, and many hoped the city would revive the decadence, clout, and charm it enjoyed before the rise of Fascism more than six decades earlier.
The politicians and the artists came, but prosperity didn't. With a debt of $83 billion, Berlin epitomizes the costly, unfinished task of economically uniting east and west. The city lacks significant industry and core businesses, and although the overall German economy is expanding after years of stagnation, Berlin is streaked with graffiti and dotted with closed factories and abandoned mills.
"At the moment we have no long-term signs that Berlin will enjoy economic growth," said Thomas Sandner, a property assessor in the city planning office. "We don't want to wipe the mood away, but we're still waiting for a better business climate."
The risks for speculators are many. Investors essentially are gambling that Berlin's image will sustain the city until the economy catches up. There are doubts about whether Germany's strict rental laws will allow foreign landlords to raise rents enough to justify their expenditures on renovations.
Such concerns have yet to deter large equity and investment companies, or the small investors and single buyers who have followed them. They have all been seduced by the city's zeitgeist, which Mayor Klaus Wowereit characterized as "poor but sexy."
