Berlin Lab

We Are the 85 Percent: How Rising Real Estate Prices Hurt More than They Help in Berlin

Apartment building, Berlin

I come from a place where owning real estate is a perfectly acceptable retirement plan.

An investment in a Vancouver condo or house is such a sure-fire win (or at the very least, guaranteed stable investment) in the minds of many that a local architect once described the city to me as “the safety deposit box of the world.”

That is perhaps one of the reasons—among many others, of course—that the most recently published census data in 2006 showed that nearly 50 percent of Vancouver residents are homeowners. In greater Vancouver, that percentage swells to over 70. And that number can only be rising, given the current trends in development, with the number of owner-occupied units being built far exceeding the number of new rental units (which were actually declining at the time of the census). Owning property is, simply put, the end goal of a massive percentage of the population in my city.

This generates a lot of problems for renters—for people like, well, me. It means astronomical rents and impossibly low vacancy rates.

But, much to my chagrin as a renter, it also means that for a very decent-sized portion of the population rising property values are, in general, a good thing. It may mean that their property taxes grow, but so too do their assets.

This is the case in a lot of major cities. In London, nearly 60 percent of households are owned outright or are currently being bought with a mortgage or loan. Even in New York, the city of renters, a third of all households own their own dwellings.

In the end, they all benefit from the rise of real estate prices.

It goes without saying, of course, that this only holds true when times are good. When times are bad—and yes, the world of real estate has seen some bad, bad times in the past few years, exemplified most strongly by the U.S. foreclosure crisis—owners obviously lose out.

But when you pull back and look at Berlin’s housing demographics, it becomes immediately clear why rising property values are such an enormous theme in this city: because a whopping 85 percent of them are renters.

This is a relatively common phenomenon in Germany as a whole. The Germans are not, so to speak, an overly risk-taking bunch. While North Americans, for instance, tend to keep their nest eggs chained to volatile and somewhat uncontrollable housing and stock markets, Germans are much more likely to keep their assets invested in life insurance products, cash and short-term deposits, and bank deposits, for instance.

But Dr. Nikolaus Wolf, the economic historian I interviewed in my two recent posts on the history of Berlin’s deindustrialization and how it has affected the past and present of the city’s real estate, explained the high number of rents to me in a bit of a side note to our interview, as even more of a certain cultural phenomenon.

“Ownership rates in general are quite low in Germany. This is particularly so in the big cities, and particularly in Berlin,” he said.

“There is not a negative stigmatization here if you are a renter. If you compare that to the UK—there it’s actually kind of a negative signal if you’re not a house owner. In Germany that’s not true. You would find plenty of, say, university professors that don’t own a house, and nobody thinks that’s odd. That’s normal,” he said.

Wolf attributes this, in part, to the various stringent forms of rental regulations throughout the country that not only ensure that the rental properties remain in quite good shape and are improved over time, but that also make renting an apartment a very secure situation. Whereas it’s quite normal in many places around the world (Vancouver, London, and New York included) to rent on the basis of short-term leases, generally speaking once you’re in an apartment in Germany, it’s incredibly difficult for a landlord to get you out. (As an interesting side note, the Lab’s curators have recently been learning a lot about similar regulations and their effects on development in Mumbai. It will be interesting to compare these when the Lab lands there next.)

“It’s actually attractive for people to stay there because you can plan over long, long time horizons. You can actually stay your entire life in a rented flat and not be threatened to move out,” said Wolf.

So while half of my city’s population is rooting for their investments to grow at the expense of the other half (who are, in most cases, paying the owner’s mortgages for them through built-in rental suits known as “mortgage helpers”), as are 60 and 30 percent of Londoners and New Yorkers, respectively, almost nine out of ten Berliners have nothing to gain and everything to lose from the real estate boom.

I’m curious, Berliners: What do you see as the benefits and disadvantages of renting? Buying? If both were equally possible, which would you choose, and why?

Photo: GaijinSeb via Flickr. 

  • F Weber

    renting or buying?
    get the fuck out of here – u have not a clue about berlin!

    • Christine McLaren

      Hmmm… can you clarify?

      • ber


  • H.

    I think Mr. Wolf is not quite right. A rental agreement can always be terminated at a 3 month notice. At least according to the law. So by no means can you live in an appartement your whole life if the landlord does not want you to.
    Another aspect of the high number of renters may be in that they are most often not permanent residents of that town or in economically weak positions. I don’t know any family, professor so forth with a permanent job who does not buy a house/appartment. However, all the people aged 18-35 I know cannot buy a house because they do not have the money and can’t settle down in the specific place due to limited working contracts. Additionally, banks in Germany are quite strict about mortages, hence it is hard to finance a house.

    • Christine McLaren

      Hi H.

      That’s an important clarification, so thanks for adding it. Yes, of course it is possible ultimately to get someone out of an apartment. I think what Wolf was referring to more, was to the normalcy of short term leases in other places that you don’t really find here in Germany. I know at home in Canada, I’ve never signed a lease for over one year. It’s the same in lots of other places that most rental contracts are on a 1-2 year basis. So once that contract runs up, if the landlord just doesn’t want to re-sign the contract with you, he just doesn’t, and isn’t obliged to. And as a side note of course, with a new lease, you can conveniently ask whatever new price you want. 

      The other points are interesting. I’ve actually been meaning personally to learn more about the German mortgage system just out of curiosity. Thanks for the nudge.


    • antjeverena

      Actually the German laws are in favor of tenants: a landlord cannot simply terminate any rental contract. If he/she wants to move in himself, he can terminate the contract only after 4 to 7 years, depending on the neighborhood in Berlin. 

  • Local resident

    Haven’t foreign speculators been driving up the cost of apartments/homes in Berlin? I read that a Danish investment firm owns/manages most of Berlin real estate. Also, many buildings (in Mitte, for instance) are being bought and converted into “holiday apartment rentals” and uninspired hotels. And with the BND moving into town, real estate– both rental and purchase– has gone up dramatically. So while the Canadians and New Yorkers might think that real estate in Berlin is “so cheap!”, it actually is quite expensive to someone living here and earning a “Berlin Salary.”

    • Christine McLaren

      Hi Local resident –

      Thanks for writing. This is exactly the phenomenon I looked at in my posts here and here – how the rises in rents due to increased investment aren’t necessarily connected to any specific rise in the economy, which is why it hits Berliners so hard. Prices are going up, but not because everyone who lives here is necessarily making more money. As Wolf put it to me: “You have an improvement in the economic situation; unemployment is going down, but this is not the main reason why property prices are going up. And that actually means that yes, for many people who live in Berlin, the situation actually becomes tougher.”

  • Shit is fucked up and bullshit

    Corporate branded analysis of our culture. This website is disgusting as is this initiative. Come to Berlin. Bring it on. You better have your army of police close by like you did in New York. We will show you what real alternative culture looks like.

    • Concerned for our cities

      For someone with such obvious pathological, misguided and grotesquely apparent uninformed anger I am surprised you can write a complet sentence without having some sort of psychotic break with reality. Pull your minimally functioning head out of your ass, do some research about the goals of this project, reassess your barely understandable political rhetoric and get over your infantile hatered of “corporate branded” support of this valuable project. Or maybe you’re just pissed off that you can’t afford a BMW.

      My final piece of advice to you is this: Hop on a jet, and repeat this in New York City. I suspect they will be more than happy to bring it on just for you.

  • ber

    Beeing in a safe neighboorhoud or close to certain schools or to have a “deposit-box” when beeing retired are often factors for people to buy. So it’s fear and social security issues that are tied to the property market.

    I wonder if these fears of the declining (western) middle-class are actually the driving forces in the property market. And not because people are happy to take on huge debts to buy.

    Add to that a general shortage of apartments in Berlin – specifically a lack of contemporary residential housing – and the developers/ banks are happy about new, desperate clients.

    But to answer your question – I wouldn’t buy because:
    1 – I am too aware of negative consequences on Berliners/ Berlin
    2 – it’s too inflexible
    3 – most Eigentumswohnungen in Berlin are crap and way overpriced
    4 – I don’t have the money anyway