At the end of last year, The Financial Times reported that the surge of prices in central Berlin was now spreading to rural areas, as buyers were forced to move further out of the capital in search of cheaper property prices.
Last year the Bundesbank, Germany's central bank, warned in its 2017 financial stability report that residential real estate prices were rapidly out of touch with reality. According to the report, flats and houses in 127 German cities in 2016 were some 15 to 30% more expensive than basic factors such as rents justified. In 2015, this over-valuation stood at 10 to 20%. As house- and flat prices are rising at an unprecedented rate, homelessness in urban areas has gone up sharply. Driven by a booming economy, cheap credit and low interest rates, the market is beginning to overheat, according to the Bank. The report showed, so The Financial Times stated, that flats and houses were 5.6% more expensive in the first nine months of last year than they were in the same period in 2016.
With a large English-speaking expat community and diverse culture, world-class museums and galleries, attractions like Berlin Zoo and a vibrant nightclub and bar scene, Berlin is one of Europe's leading start-up hubs. But all is not well on the start-up horizon. Recently, foreign companies complained that Germany is slow in recognising overseas qualifications, which makes recruitment a difficult issue for budding companies, who must compete on a global stage for the best talent. When the likes of SoundCloud falter, and the company is not the only tech-shooting star to stumble financially last year, there is a risk that the housing bubble could deflate as quickly as it has arisen.
What has been dogging Berlin so far is not only the sluggishness with which German authorities are prepared to accept overseas qualifications, but also a lack of venture capital, and a domestic market that is simply too small. The German culture also permits innovation only in small steps rather than big steps, unlike Silicon Valley's. Tech start-ups must thus concentrate on gradual improvement of their existing products and workforce rather than seek radical innovations in leaps and bounds, something totally alien to their American counterparts. Failure to adapt legislation and cultural mind-set to the speed with which technology is changing will have serious consequences for Germany's - and with that Berlin's - capacity to remain competitive on a global stage.
For now, Berlin's still regarded as a start-up haven, but a serious shortage of software programmers - Germany's home grown talent tends to go to the US to work - is already making itself felt. Nervous real estate investors may already be eyeing Frankfurt as a safer alternative as a result.