Though some east-side residents chose to remain in their often dilapidated, coal-heated apartments, countless others left for parts of the world that had been walled-off to them for the past 28 years -- often leaving their sizable, modestly-furnished flats behind.
Young Germans spent the next decade filling the slew of abandoned real estate, first squatting it, eventually switching out the old locks for their own, and finally entering reluctantly into rental contracts with companies who would later acquire the buildings.
Following two decades of notoriously cheap living in Berlin despite privatization, however, numbers show that real estate prices -- along with rent rates -- are climbing no where as fast in Germany as in the capital city.
Real estate prices shot up at a nationwide rate of 11 percent from 2003 to 2011, with properties in notably expensive cities such an Munich up by 23 percent, Hamburg by 31 percent and Berlin coming out on top with a 39 percent increase in the price of its residencies, according to a study by the Cologne Institute for Economic Research (IW).
"We're seeing the cost of properties go up about 6 to 8 percent per year in cities like Berlin, Munich and Hamburg, and this is a new development," Dr. Michael Voigtländer of the IW said.
The institute's director Michael Hüther also told the country's Süddeutsche Zeitung that the development is particularly notable because the appreciation of real estate in Germany lay under the rate of inflation for so many years.
The catalysts for growth have been many, the latest of which is widely attributed to the Euro crisis: the frantic search for secure investment has landed many a Euro-weary European in Germany's seemingly stable real estate market. Coupled with the country's relative overall economic stability, including a positive outlook for employment and productivity, the appreciation is seen by many experts as an overdue development.
But with the housing bubbles that plagued the U.S., Spain and Ireland fresh in the collective memory of European investors, the news has been met with critical questions about true nature of the valuations.
"We ran a study on the five largest German cities and could not detect any signs of a real estate bubble, particularly since real estate prices seem to be rising in line with rent rates, suggesting little chance of an overheated market," Voigtländer explained.
But with little industry to its name, Berlin is seen to have few things -- including its affordability and growing international appeal driven by an influx of creative professionals from other parts of Europe and the world -- to account for its drastically appreciated real estate market, leaving experts cautious.
"One exception [to IW's bubble study] is Berlin," Voigtländer said. "As opposed to other cities where the supply of properties has gone down, it has increased in Berlin, indicating the frequent reselling of real estate, which heightens the chances that values may not actually have gone up as drastically as the numbers would suggest. Still, the margins are nowhere near as dramatic as in Spain or Ireland."
Experts confirm that, although real estate can't be guaranteed to yield large returns from this point on, properties in Germany remain a safe bet.
"At the moment, the alternatives for secure investment aren't there: stock markets are volatile right now, government bonds and loans aren't functioning quite properly... and many people are looking for a secure place to put their money. With a positive economic outlook in most German cities, real estate there can be considered a safe investment," Voigtländer said.
"Munich, for instance, is poised to do well economically over the next 20 years, so you'll likely be able to sell again at a good price with few problems -- values just aren't guaranteed to rise any more."
Despite a rosy top-down outlook, however, IW experts also warn that low-income residents concentrated in places like Berlin may soon be in deep water:
"There is the danger that low-income residents will soon have trouble making rent -- or simply won't be able to make it at all," IW economists warn. According to a report by the Süddeutsche Zeitung, a second trend makes the danger even more real: public housing has been reduced by a third since 2002 -- a statistic the German government made public following a request by the country's Leftist Party.
Ulrich Ropertz of the German Association of Renters told the paper that if nothing changes, the country may be missing some 825,000 apartments in just five years.
PHOTO: Flickr/Matt Biddulph
This post was originally published on Smartplanet.com