Posts Tagged 'RealEstateBubble'

inflation: if it’s not behind you…it’s ahead


109339958 Today in the office I had a nice discussion about the risks of the come-back of double-digit inflation down the road in a couple of years or so, something that we kids of the 70s recall when shopping with our mums at the supermarket.

To me back then it seemed NORMAL that prices of pasta Barilla and Nutella would change every week or so, I did try to desperately memorize the prices but it wasn’t worth the effort. We had then mini-assegni, funny wannabe banknotes-in-lieu-of-coins, something I hear is back in fashion in the US these days. Early 90s, freshly graduated, my first image of London was one of building societies changing daily the interest rates on the window-displays, and I clearly remember that it was in the double-digits (and starting with a “2”).

The discussion ended with “it was all the fault of the Versailles Treaty, it paved the way for disaster for poor Weimar young and sexy Republik…then things went sour”.

Or, as in Tom Tykwer’s “The International”, big debts are big crow bars….

Even if I do not particularly like the new Herald Tribune web edition layout, I do looove the fact that now when using the SEARCH function you can dig deep and directly in the PDFedded archives of the New York Times… there are very interesting articles for useful meditation…which remind me of hedge funds buying single-handedly entire blocks in East Berlin from the helicopter only a few quarters ago, or individual investors buying flats on the basis of the Expose’ and looking up the property only on Google Earth, and not by stepping in the Kiez and walking up the Treppe of the Vorderhaus.

There were neither copters, nor Google Earth back in 1922, indeed turbolent times and postdemocracies are back in Europe…and Angela may be quite right in fearing the comeback of those zeroes by the kilo.

taking the hype out of the hypo

Today’s Economist has a couple of interesting articles on Germany, bailouts, real estate, HRE and cash-for-clunkers car bonus. The most interesting bits in my opinion are:

The plans are hobbled by two constraints. The first is that the government hopes to avoid transferring much of the risk of losses to taxpayers without first punishing shareholders. That conflicts with the government’s equally pressing desire to avoid nationalising any more banks. These contradictory aims preclude the government from, for instance, wiping out the value of equity in banks by forcing them to write down their assets.


…fretting about debt and inflation is equally characteristic of the German soul. Many commentators have criticised the scrapping bonus. Singling out one industry for subsidy, even if it accounts for 20% of industrial production, is economically dubious. The bonus may rob sales from other deserving industries, from white goods to beer—as well as from future car sales. In France, which offered a scrapping bonus in the mid-1990s, sales slumped by 20% in the year after its expiration.

…but you can read the full articles herebelow.

Continue reading ‘taking the hype out of the hypo’

Location, location, location!

Just back from beautiful Berlin dressed up for Fall, and here is an article on the real estate market.
Location is the most important factor. This is why you need good shoes (and a bike) when looking for flats. You can indeed find something very expensive and hype, or very cheap but in no-man’s-land.
My personal feeling is that during this phase of the financial crisis Sellers who are individuals are waiting before parting with their properties, because they do not feel so confident about holding cash.
At the same time, there could be financial institutions who had borrowed in order to do big developments who may give up. So…the market is in wait-and-see mode. Keep your options open, then…
If you click the title you will see also many comments to this article. You already know AflatinBerlin’s view…
a) Berlin is a value story, not a speculation one – that was a few years back…no quick bucks here.
b) Berlin Maklers are very professional. It is true that the majority do not speak English but the Expose’ are so detailed and the descriptions so close to the reality that you can do your scouting even if you do not speak German. When you get closer to the transaction you will ask for a professional translator’s help…the German Embassy provides always a list of professionals you can trust.
c) there is not just Plattenbauten (=monotone apartment blocks), so…look for location, location, location!
d) there is more to it than Prenzlauerberg!! (we are going West)
Timesonline October 17, 2008

Berlin is cool and property is remarkably affordable

Apartments in the trendy parts of the German capital go for as little as GBP 45,000

Berlin is pinning its hopes on the young. More than half its population is below the age of 35, media companies are flocking to the city and, with three excellent universities, it is establishing itself as the biotech and research capital of Germany.

The Government has invested €75billion (£59 billion) to improve the infrastructure of the city, enticing expatriates to find a home there or invest in residential properties. This, combined with numerous cultural and scientific places of interest, is only adding to the city’s attraction.

The recent privatisation of the public housing stock has led to a small increase in the number of homeowners. However, the city has a strong rental culture – only 14 per cent of local people own their home – and with the rents low and laws heavily favouring the tenant, there is little to drive the domestic market.

Charles Peerless, a director of Winkworth’s international department, concurs: “Berlin is exactly what the current housing market needs. With its huge rental market, it is a safe investment. The ‘less risk and less reward’ strategy is what most long-term investors are choosing.”

The choice in Berlin ranges from the former East German high-rise blocks near Alexanderplatz and the experimental living communities of Kreuzberg to the Neo-Classical buildings of Prenzlauer Berg and Friedrichshain. The latter are the most popular with foreign investors.

These large apartment blocks, with their elegant stucco façades, were built in the early part of the 20th century and offer spacious, high-ceilinged accommodation that is usually ranged around an enclosed garden square. Most of these properties have been sold off in volume to investment companies that are extensively refurbishing, adding central heating, double glazing and modern kitchens and bathrooms. The buildings have been re-roofed, the communal gardens landscaped and all interiors redecorated, with the aim of increasing rents and, in turn, improving capital values.

Andreas Pichotta is one such developer. As a passionate Berliner and admirer of the city’s architecture, he makes his projects as much a labour of love as an investment, although he knows what will make him money. “The most important part of the investment business is getting the right location,” he says. “There is an abundance of very cheap, unrefurbished property in the city but if you buy in the wrong place you are doomed.”

He uses his local knowledge to choose the buildings that he buys and refurbishes with great care. He has made good investments in Prenzlauer Berg and Friedrichshain. Prenzlauer Berg is an area of the city undergoing a renaissance. There is an abundance of restaurants, cafés, bars and eclectic boutiques. Many of Berlin’s media, arts and student population live here. It was not bombed in the Second World War so there is a wealth of old-style apartment blocks. Many have been restored to enhance their traditional features, creating picturesque squares where regular farmers’ markets attract affluent locals.

The area has the highest birth rate in Germany. It became very fashionable in the late 1990s and those who moved there then are now in their 30s, young professionals with families, looking for larger apartments. The location is perfect for commuting into the city and, accordingly, rents are beginning to rise.

Perhaps an even better investment might be the slightly shabbier area of Friedrichshain, in East Berlin, which contrasts with the more gentrified and expensive areas of Prenzlauer Berg and Mitte. After the Berlin Wall came down, Friedrichshain began to develop a reputation as a young district. Its lower rents attracted artists and students; its multitude of empty flats also attracted the attention of West Berlin squatters. It retains its slightly run-down atmosphere – which gives it its character.


Target price: Eur 1,000/square meter

Real Estate bubbles hurt

Real Estate bubbles hurt

The Herald Tribune article was rather clear about it. Prices in Berlin were on a different planet compared to those we were used to in Rome. It could be 1,000 but also 3,000 depending on the area and the flat’s condition, but it was not comparable with the Montecarlo-style prices in Rome.

We had given up the idea of buying a flat in Rome a few years ago, when they went from plain expensive to claerly nonsensical. Then, there had been the garages speculation. Something similar to the tulip mania in Holland in the 18th century . Garages changing hands fast: you buy, then sell at a higher price, then buy another one…A price of a garage could have been close to 100k eur. (A garage?!?!? I would expect you store at least a Bentley in it for that price!)

Well, we’re country mice and not really used to this sort of magheggio. We need to understand the price of what we buy, even for a pair of shoes. So we held on to our rent. Yes, maybe throwing money out of the window. But we have probably the only 100% legal, declared and fiscally transparent rent deal in the city of Rome – our landlord is a…lord – and it’s not too bad.

So Berlin appeared to us the only town in which we could invest our savings without having to top them up with a big mortgage.

Come 40, you badly feel the need to own your own house. Something in between Eur 1,000 and Eur 3,000 per square meter seemed a fair price for satisfying this fortysomethings’ urge.

Enter your email address to keep track of what's going on at AflatinBerlin - check your Inbox (and Junk mailbox too) to activate the subscription!

Join 10 other followers


Blog Stats

  • 38,265 hits