Berlin Ten Years Ago

Berlin in 2015: the most popular destination for residential property investors in Europe. The economy is growing, unemployment is going down, the tourist trade is flourishing, property rents and prices are rising faster than in any other European metropolis. Even the formerly distressed borough of Neukölln has become an up and coming part of town – both among tenants and investors.People tend to forget with the outlook was ten or twelve years back. I took the time to browse through some old newspaper issues. On 20 March 2002, the Berlin daily “Tagesspiegel” reported on a “Berlin Future Panel” hosted by the DIW German Institute for Economic Research. The DIW noted that, while Germany as a whole was bringing up the rear in Europe in terms of growth, Berlin lagged far behind the rest of Germany. The institute backed its observation by citing slowing tourism and plummeting retail sales.

Another daily, the “Berliner Morgenpost,” wrote on 22 August 2003 that the void rate on Berlin’s housing market had climbed “to a record level.” It quoted a figure of 160,000 vacant flats. There was a row between Building Senator Peter Strieder of the Social Democrats and Gernot Klemm of the leftist PDS: According to the paper, they debated whether to limit large-scale housing demolitions to prefab housing or to relief the excess supply situation by razing period buildings in the inner city as well, as demanded by the PDS.

On 10 February 2004, the “Immobilien Zeitung” carried an item headlined “Berlin housing market under pressure” and reporting a vacancy total of 130,000 flats. The paper cited a survey by HypoVereinsbank that predicted a further dip in residential property prices. The bank’s forecast for fair residential locations was an “deterioration of prices.” Condominiums were selling at 1,000 to 5,000 euros / sqm but “virtually no one” wanted to buy new apartments or apartments with more than two bedrooms, or so the article suggested.

In November 2004, “Spiegel TV” carried a report about the Neukölln: “Neukölln is considered the poorhouse of Berlin. In a borough with more than 300,000 residents, nearly one in four people is unemployed. Nowhere else in Europe will you find a greater welfare density.” Here is a headline the “Berliner Zeitung” ran in January 2004: “Neukölln – soon a no-go area”. And “Die Welt” announce on 09 September 2004: “Neukölln: the poverty hub where being on the dole is normal”.

When I decided to buy apartments in Berlin during those years, most “experts” thought I had lost my mind. They started shaking their heads for good when I acquired a tenement in Neukölln in 2004. Deutsche Bank refused to underwrite the deal. Was I unaware of the poor economic prospects for Berlin, they asked, where more than 13 percent of the people were without a job? The rate in Neukölln was actually 14.6 percent, and I was well aware of the fact. After all, I was reading the same papers as everybody else. But I was sure that the state of affairs was already factored into the prices. So I got the house in Neukölln for 6.8 times the annual net rent – and could now sell it for 17 times any time. The name of the estate agent, by the way, was Jürgen Michael Schick.