Some of the cheapest housing of any major European city is attracting a wave of foreign buyers to the German capital, promising a new property boom after a false start after the fall of the Berlin Wall nearly 20 years ago.
Buyers from Britain, Scandinavia, Ireland and the US are leading the rush to snap up apartments in the once-divided city, making the 12 months up to last November the busiest on the property market since World War II, estate agents say.
Foreigners were responsible for 70 percent of the transactions, the German federation of estate agents said, with Danes spearheading the march. The interest is so high that Danish estate agents have opened offices in the city.
One Danish agent, Esben Tjalvi, said Danes found the prices too good to resist: "At 1,500 to 2,000 euros [US$2,200 to US$2,950] per square meter, it's up to four times cheaper than in Copenhagen and Stockholm," Tjalvi said.
But private buyers alone do not account for the eye-popping 28 percent rise in turnover in the first half of last year -- that is thanks to the muscular presence of investment funds that are snapping up dozens of apartment blocks.
Cerberus Capital Management and Goldman Sachs' Whitehall fund have invested 2.1 billion euros since 2004.
"In Berlin, the price per square meter is one of the cheapest of any major city in Europe, including those in eastern Europe," said Andrea Magnoni, the Italian cofounder of the Valore fund.
"The return for investors is higher than anywhere else at between 7 and 8 percent compared to 3.5 percent in Milan because even if the rents are moderate the purchase prices are always low enough to guarantee a good rate," he said.
Investors are speculating on rents rising.
The influx of investors to Berlin is having a marked effect on the landscape of the city.
Whole streets are being renovated without the city authorities having to dig into their already massively stretched finances. The decrepit apartments with coal-fired heating and toilets on the landing are disappearing and new shops are opening.
This in turn is creating jobs, not only in the property sector but also in the building trade.
But Berliners fear that the property boom is threatening to change the character of a city that has an alternative feel.
The once rare occurrence of tenants forced to leave so that the owner can raise rents is now becoming more common, some say.
Meanwhile, luxury apartments are mushrooming, with prices well beyond the reach of most residents in a city where 11 percent of the population is unemployed and thousands of students and hard-up artists make their home.
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