It’s in every Berliner’s conversation: rents have increased to crazy levels and affordable property in a central location is almost a long-gone dream. This topic is usually part of broader “Berlin was better before” debate. It comes before the “Open airs use to be free” remark and after the “Hipsters are ruining it for us” comment. Whether or not debate is worth pursuing or not, i cannot say, but we can see however that dramatic changes have impacted how much we pay every month to call a place “home”.
But how did we get it here exactly? And what can we expect in the future? Today, we try to give you some food for thoughts on the matter.
So how bad is it really?
Over the years, we have a had a few studies to put numbers behind the general trend. The MorgenPost has even put a few interactive charts out that gives a great overview of what’s happening. This map shows the rent increase since 2009 (per Bezirk) where figures often show 60%+ increase or even up to 100% in some of the more hip neighborhoods of Neukölln like Schillerkiez.
All the same, enter your postal code here to learn more about the property price increase since 2010. Type “12045”, and you will see a 236% increase in property value around Sonnenallee or a 111% increase around Gesundbrunnen with “13357”. Those are radical examples of course, since those neighborhoods are historically the poorer parts of the city. All around however, since 2007, prices for flats increased 97.7% and rental prices by 51.1%. So this is well established: it’s definitely crazy. But why is this happening now and not 10 years ago ?
1- Berlin and its unique history shaped the city landscape
If you look at pre-WW2 pictures of Berlin, you might recognize features often seen in other Western capitals like Vienna, Budapest, Paris or even Amsterdam. The old city-center surrounded by more recent outskirts, all organized in concentric circles. But of course all of this changed during the war with the city’s destruction that reached 90% and even change further with the long 60 years of divide between East & West Germany.
The isolation of West Berlin during the Cold war scared all a lot of industries and other big companies’ HQs away. All the leading banks like Deutsche Bank & other major actors like Siemens, Lufthansa, Allianz, or Scherle and numerous SMEs left the city and it’s difficult business environment to go West. While West Germany was going under a miracle economic recovery, West Berlin was left out with a major unemployment problem in a stripped-down-to-the-bones economy. You can imagine that this made the city very unattractive from an estate point of view since life was so not so good there.
After the reunification of the country, many people believed that since those negative factors were lifted, the city would become attractive again for those companies, eager to come back after so many years, thus triggering an economic boom similar to what West Germany experienced. This could also be provoking a major increase in rents and estates prices. However, this never really happened as all those big employers spent decades building their empires in their new location, and were doing just fine. No need to invest money to move back in when you can do business just as well where you are, right?
So no economic miracle = unattractive living conditions = little to no change in rent during the 1990s.
However, as we know, this all changed in 2000’s with the renewed reputation of Berlin for arts & tourism, and the appearance of a creative digital business scene, boosting 3 important sectors in Berlin. Ultimately, the fantastic business environment created by innovative SMEs attracted bigger groups that started to invest back in the city since a few years.
Little by little, Berlin began to be a very attractive city for many people thanks to its high life quality:
- Workers, expats from outside Germany seeking better opportunities
- Workers coming from other regions in Germany (Bavaria, Saxony, Hamburg) looking for a more laid-back/alternative lifestyle
- Erasmus Students coming for the party
- Students from other regions in Germany coming for the party too
This naturally induced an upwards trend on prices since demand went up, a lot. With an increase in demand came the interest of investors that discovered a perfect sand-box, with the consequences we know.
At this point, i would like to debunk a myth that i’ve heard before: “Expats are vastly responsible for this trend“. This is definitely not true for appartement prices and it’s mostly untrue for rent prices. (I only talk about individuals here, not foreign companies).
Appartement prices: Only 15% of people living in Berlin own their flat/house. This means that the vast majority of estate is owned by big estate groups that buy and sell 100s of properties at a time. The market is therefore not composed of many small owners making it very difficult for a minority of individuals like expats to create such a trend.
Rent prices: There is certain share of responsibility from Expats in the increase of rent prices in some parts of the city. When landlords deal with tenants used to London prices, they will try to push the prices up. We are unwillingly taking part in that. However, the same can be said from German people coming from Munich or Frankfurt, which are vastly more expensive than Berlin, even today.
2- The B-Side of Wowereit
This is also a little known fact but Klaus Wowereit, praised mayor of Berlin for 14 years (2001-2014) who became famous for openly coming-out as gay and for saying the words “Berlin is poor but sexy“, is also greatly responsible for the speed with which the market has evolved.
Between, 2002 and 2007, Wowereit oversaw a program which sold 110,000 government-owned-apartments to the private sector as well as the removal of a rent subsidy program for 28 000 others. To give you a better sense of proportion: the transaction represented one-third (1/3 !) of the city’s social housing reserve. By doing so, he gave up much control over the evolution of prices in the capital. No doubt that the normalisation would have had happened sooner or later, but it might have happened less abruptly if those flats were still owned by the state today. This has particularly affected poorer layers of the population, who are the first to yield to property developers who raise prices.
I wonder what led to that decision? To be fair, there were some conditions attached to that privatization to avoid speculation, but nothing legally binding.
3- Current initiatives to keep Berlin affordable
So the future does look a bit bleak, especially since wages are rising a lot slower than rents are.
Fortunately, Berlin has historically been very protecting of tenants. Local tenancy law has probably somewhat slowed down the process of aggressive attempts at pushing people out of old contracts. However, it cannot alone stop the rapid changes happening today.
The city is fully aware of what’s happening and is clearly set on preserving the social diversity across all Bezirke, with affordable housing for everyone.
One strategy to achieve that is to buy back a property using the right of first purchase (“Vorkaufsrecht”) in some cases. This means that the city has the possibility to make the first bid on a property should that be for the city itself, or for a third-party such a local cooperative. The property can thus become a social-housing project with reduced rents for tenants. This shows limits however since only so-called “protected areas” can benefit such a strategy.
Do you know other initiatives by local associations or others worth mentioning? What impacts have you seen around you?
This article was written by Bastien Allibert from Settle in Berlin.
About Settle in Berlin: Started in 2011, SiB is the most comprehensive resource to all things practical when moving to Berlin. Anmeldung, finding a job, taxes, setting up internet, coworking spaces, finding a bike, & even buying an apartment in Berlin. It’s all covered there, clearly explained so you can focus on enjoying your new life instead. It is also a resource recommended by the Berliner-Zeitung as well as Expat-Blogs.