Neil I think you're absolutely right on Berlin. I also think that this whole question of 'cheap', 'under-valued', 'over-valued', etc is a red herring, or, more accurately, a question of semantics. What people seem to mean when they say 'cheap' is that they believe prices will rise; when somewhere is 'over-valued' prices will fall. I think it's better to talk about 'value', personally. The price something is selling at is market value. Full stop. The only thing that matters is what direction is a market headed (and, as Simon makes the point, 'when' will it head in that direction) - up or down. And, I agree with you 100%: if there is a lasting squeeze, slowdown or deterioration in confidence, Berlin will be among the first markets to tank. So, where's the value in that! cheers

i also fully agree with your comments, neil, and thanks for the useful FT link. given a lot of investors want some germany in their portfolio, how about PS finding us a development in munich? wouldn't want you have to spend all your time in east europe and yorkshire.

For what it's worth I agree too! Not often you get 3 posts in a row in agreement on this forum! Recent stats suggest prices have actually edged off a little in Berlin and no signs of change. Huw

Thank you for an interesting and thoughtful post. In value terms my current portfolio is split evenly between Berlin and Prague. I agree with a lot of the article although not all, and I think there are some excellent points and some missed points. If I had resources to invest further I would currently choose the Czech Rep, or if looking for newer markets Rumania or the Slovak Rep. I wouldn't be looking further in Berlin currently However I would like to point out 1. Berlin is a city which is difficult to compare with any other. Compared to London , Paris or Frankfurt it is very spread out and very green, it is even difficult to define a centre to it. The centre could be the K'damm (if you are a west Berliner thinking pre-unifcation mode), Alexanderplatz (East Berliners) or the Brandenburg Gate/PotsdammerPlatz/Friedrichstrasse which are regaining their pre-eminent central role post unification. Although comparisons are made with London in terms of per sq m price being something like 10-20% of London prices, it is difficult to state that you are comparing like with like because Berlin is no way the financial centre of Germany (more like Frankfurt) 2. The market within Berlin itself is probably as diverse as the whole of Germany itself. Per sq m prices can vary much within even 100-200m or the next street, and that can make determining value quite difficult. Demographics are enormously varying within Berlin, as well as social structure, housing etc. Berlin has a young population which can be construed as favourable demographically and some parts of the city are uniquely favoured from that angle, especially the leafy and popular Prenzlauer Berg and the up and coming suburb of Friedrichschein. They, both former eastern areas are in my opinion the most favourable areas to invest in with better yields and demographics than Charlottenberg close to the K'damm. Interestingly, it seems that it is often the former eastern areas rather than western areas which are more desirable areas to live in and invest in eg prenzlaur Berg is better than Wedding, Treptow is better than Neukolln and arguably Mitte and Friedrichschein are better than Charlottenbug and Kreuzburg- Apart from Potsdam there are amost no sizeable towns within easy commuting distance of Berlin, so there is no high volume commuting into the city itself like there is in London 3. De-regulation of the labour market within the EU will allow Polish workers to compete for work within 3-4 years which could dramatically improve investment prospects- Poland is only 1hr away from Berlin. 4. Property is incredibly affordable in Berlin wrt CEE and the UK ! It will take time and a shift in attitudes but while in CEE and the UK the average property is typically costing 6 years salary in Berlin it is close to 2 years salary! I know other factors are at work here such as equity in current housing which people in the UK and CEE tend to have and Germans tend not to have, but that can give an idea of the scope for growth. Berlin (or indeed Germany)can be likened to a juggernaut while the CEE countries are more like a Mercedes transit van, more nifty and adept. I would be inclined to invest in Berlin carefully, or maybe even better some parts of Germany for the retirement pot while other parts of CEE will undoubtably achieve faster growth over a shorter time span. Although the market is a little overhyped amongst foreign buyers, it certainly isnt going to tank (it's actually tanked over most of the last 10-12 years already!) but it's probably moved up as much as it is going to for now. There is limited new build. After all we in the UK thought all the foreign property buyers in London were crazy in the early 1990s, but per sq m Berlin prices are not hugely in excess of prices in surrounding areas. There is some "quality " factor in Berlin, although it is not in the same league as London. possibly Prague and Paris too.

Hi Charles U raise a few sensible points on why Berlin is attractive in terms of quality of life, the neighbourhoods, the leafy suburbs and its low prices comapred to the Uk. Thats fair enough but those arguments arent what might make price levels in Berlin take off. Future investments, a strong job market and a tight supply are the main reason that would make prices embark on a sustainable growth path. None of those is happening at the moment and unlikely to happen 5 years down the line. You've also raised the pt of the job market being open to eastern europeans by 2011. That is true but having spoken to quite a few EEs, most of them would rather head west and south of the country where there is much better pay and more job opportunities. Which brings me to the pt that if anyone is itching to invest in Germany, they might as well invest in the cities most likely to first benefit from any future price growth. Berlin is certainly not one of them IMO. I do agree with u however that germany in general is a good hold in a long term strategy, provided one gets a good LTV funding. C.