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INTERVIEW: Is there a solution in sight for Berlin’s housing crisis?

Housing is getting more expensive around the Bundesrepublik, with the problem particularly pronounced in cities like Berlin and Munich. While there's no quick fix, experts told The Local's Germany in Focus podcast that not all hope is lost.

Housing complexes in Berlin.
Housing complexes in Berlin. Photo: picture alliance/dpa | Monika Skolimowska

Even many Berlin veterans will tell you it’s hard to remember the German capital without its crazy housing stories.

Having arrived myself in late 2011, you’d hear all sorts of anecdotes even then of the kinds of things people who had a room to offer would ask for.

Whether it was advising that one of the flatmates slept in a coffin, to requests for nude pictures as the household was explicitly nudist – it didn’t take long for a newcomer to realise that those offering rooms had the upper hand over those who needed them. “Casting parties” where 50 people would view a flat at once were common.

It’s only gotten worse. A lot worse.

READ ALSO: PODCAST: How bad is the housing situation in Germany?

Red Tape Translation Founder Kathleen Parker came to Berlin herself in 2012 and started working in relocation. “There was an apartment shortage then, but that is nothing compared to what is happening right now,” she told The Local’s Germany in Focus podcast. “It’s extremely difficult.”

Parker says relocating to Berlin is itself becoming time-consuming and costly – and that’s before you’ve even put down a deposit. Relocation firms offering flat search packages are booked out until October. Many will often only accept people who have “reasonable” enough expectations and a high enough budget.

“Everyone else seems to be left to fend for themselves,” Parker says. “Supply is low, demand is high. That’s the main issue.”

Parker says she hears stories consistently now where real estate agents will take an ad for a flat down within an hour of posting it online, simply because there will already be 200 applicants within the first 20 minutes.

“If you are not online at the right time or you haven’t figured out a bot to apply for the right place at the right time, then you’re too late,” she says.

Flats in Berlin's city centre.

Flats in Berlin’s city centre. People relocating to the capital with a high enough budget often hire relocation firms to help find a flat amidst hundreds of fellow applicants. Photo: picture alliance/dpa/dpa-Zentralbild | Britta Pedersen

Parker says that if you have the money to spare, hiring a relocation firm may be a good idea. Many will also guarantee a certain number of viewings.

If you’re going it alone though, there’s still a few tricks you can use.

“Have a ready-to-go application package with all of your documents saved as one PDF and have it ready to go in the blink of an eye,” Parker advised, adding that your documents should be in German. “Have it saved on your phone so you can send it off with one click.”

Any relief in sight?

Unfortunately, flat seekers can expect the capital’s housing crisis to continue for quite some time.

Thomas Beyerle, a real estate professor and Managing Director of Catella Property Valuation, told the Germany in Focus podcast that the problem can only be fixed by increasing housing supply.

“Build, build, build,” he said. “The demand is definitely there.”

Beyerle says governments can certainly do a lot more to help address the problem, but rent brakes – like the one Berlin tried in 2020 before being overturned by the Federal Constitutional Court – won’t help.

“It totally failed,” He says, as it no longer became financially viable for some landlords to rent. “Over 40 percent of the listings online disappeared overnight.”

Instead, Beyerle says governments would do better to provide stimulus packages to help build housing, as skyrocketing inflation has made many construction materials increasingly unaffordable. He adds that demand is still rising, but supply is stagnating – but governments can help by putting in some relief money to help construction companies pay for materials – and thus more affordable housing.

READ ALSO: Why Germany’s housing crisis is expected to drag on

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How high interest rates are hampering homeowners’ dreams in Germany

Rising interest rates are driving property developers in Germany into bankruptcy - and leaving would-be homeowners out in the cold. Will the government's latest plans to tackle the crisis be enough?

How high interest rates are hampering homeowners' dreams in Germany

Valeriy Shevchenko felt like he made the purchase of his lifetime when he beat a queue of prospective buyers to secure a two-bedroom apartment in one of Berlin’s most popular districts.

Two years on, the 33-year-old’s housing dreams have come crashing down after the developer of his new home, Project Immobilien, went bankrupt.

Hit by a sudden jump in interest rates and raw material costs, twice as many developers have filed for insolvency over the last year than during the previous 12 months.

Like hundreds of homeowners-to-be across the country, Shevchenko found construction of his new home suddenly halted, as workers cleared out of the site where the concrete skeleton of the building stands with no windows.

READ ALSO: Germany sees record drop in property prices

“From the middle of August, the construction was frozen. The cabinets for the workers here, the crane in the middle, everything moved away,” said Shevchenko at the site, shellshocked by the setback.

With such scenes multiplying across the country, Chancellor Olaf Scholz’s government on Monday offered a new package of measures to help ease the pressure on builders and homebuyers.

They include a pledge to not toughen up energy standards that could prove costly for developers, while extending mortgage help to families and financing for renovation.

The construction sector voiced satisfaction with the package, with Tim-Oliver Müller, president of German building lobby group HDB, saying that the measures were “more comprehensive than expected”.

‘All my savings’

For years, record low interest rates and strong demand had spurred new projects and investment in Germany’s property market.

But a sharp rise in consumer prices as a consequence of Russia’s invasion of Ukraine has forced the European Central Bank to aggressively raise interest rates to curb inflation, drastically pushing up mortgage costs and in turn bringing down property prices as well as profit margins of building projects.

Builders are also suffering from higher raw material costs, a problem that had already begun during the pandemic but which has been accentuated by the Ukraine war.

A construction worker works on the new construction of an apartment building in the new development area of ​​Hanover-Kronsrode.

A construction worker works on the new construction of an apartment building in the new development area of ​​Hanover-Kronsrode. Photo: picture alliance/dpa | Demy Becker

“Investors no longer know how to make certain projects profitable,” said Müller.

In a sign of the crisis, developer giant Vonovia recently decided to put 60,000 projects on hold.

One in five property companies has reported cancelling building projects in August, while 11.9 percent face financing difficulties, according to a recent survey by economic research institute Ifo, which described the figures as unprecedented in 30 years.

READ ALSO: Why does Germany keep missing its house-building targets?

Many of the halted projects are also well advanced, pushing buyers into dire financial straits.

In Berlin, investors of the Project Immobilien’s construction had already paid half of what is due.

“I’m not a rich person. My money is the fruit of my labour,” said Shevchenko, who had already paid up €250,000 for the apartment he bought for half a million euros.

Valeriy Shevchenko

Valeriy Shevchenko of Russia poses in front of the site of the unfinished “Malmoerstrasse 28” residential housing project on September 18th, 2023. Photo: JOHN MACDOUGALL / AFP

With no insurance purchased by the building company or the future homeowners, there is no financial protection against the sudden bankruptcy.

Their only hope now is to find someone else to take over the construction, or to finish it themselves.

“I never thought that something like that could happen in Germany,” said Marina Prakharchuk, 39, with tears in her eyes.

The Belarusian had paid up €175,000 for her 45-metre square apartment.

“All my savings are in there,” said the employee of a logistics company.

Housing shortage

Beyond the investors left roofless by insolvent developers, the property crisis risks spiralling into a giant social crisis as the knock-on effects from the building slowdown crash into the rental market.

Scholz’s government had promised to build 400,000 homes a year to alleviate an endemic housing shortage made worse by burgeoning demand from an inflow of refugees and foreign workers.

But building permits have nose-dived 25 percent between January and June compared to a year ago.

READ ALSO: EXPLAINED: What is Germany doing to solve its housing crisis?

Experts believe the sector will struggle to even hit 250,000 in new build approvals this year, while next year bodes no better with a forecast of under 200,000.

With fewer new housing stock coming on the market, rents are rising unabated, further eroding households’ purchasing power.

“More affordable housing must be built in Germany so that young families and those who are looking for apartments can have a good chance of finding one,” said Scholz, after the crisis talks.