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SPECULATIVE CITY-PRODUCTION

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Financialization of Inner City Developments in Berlin
by Laura Calbet i Elias


Housing Development in Berlin

The housing prices in Berlin began to increase in 2009, as the real estate boom in the U.S. and in many European countries came to a temporary halt and the financial crisis went global. As in other countries before, rising housing prices are depicted as the imbalance between ‘supply’ and ‘demand’, as a consequence of economic and population growth, or simply as part of a so-called ‘normalization’ process of the city.

Problematically, the official explanation model for the housing problem overlooks at least two important questions: the role of preceding housing policies and the financialization of the housing provision system. Indeed, both created the necessary conditions for real estate to become a coveted investment-asset and fostered the increasing real estate speculation.

Financialization related Urban Research


The growing significance of real estate investment and the resulting price development are connected to the increase of finance transactions on a global level (Harvey 2012). These constitute, in my opinion, one of the most powerful ways in which global processes are transforming the production of the city today; a classic example of the „World in the City“.

Studies which explore the relationship between the financial expansion and changes among various spheres of life use the term ‘financialization’ (French et al. 2011).

The urban research discussion related to financialization focuses primarily on issues of housing provision economies. The analysis of the role of a financialized housing production in the current urban transformation, however, remains in an early stage. Since the housing provision system is particularly relevant for the ur-ban development, the upsurge of real estate investments constitutes a substantial aspect of the neoliberal city transformation.

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Preliminary Empirical Findings

For two reasons the analysis of new developments (and its actors) is particularly relevant to understand housing financialization and current urban development processes in Berlin: For a resi-dential construction activity is one of the sharpest indicators of a turnaround in the housing market in Berlin. In addition, the new residential construction is politically promoted as the main measure to address the housing problem. This development is a result of (1) the dismantling of social housing policies and (2) of the aperture of the housing markets for financial investors. Important features of a financialized housing provision and development are:
• Modified business models
• New actor constellations
• Changing financing strategies

Projects: Modified Business Models

The building activity in Berlin was marked for decades by the public funding of rental housing. After the exorbitant hous -ing boom that followed reunification, construction activity fell abruptly after 1998. Housing policies were simultaneously dismantled. Project developers subsequently changed their busi-ness model from the previously state-guaranteed 30 years rental income to short-term investments. The low levels of construction activity were directed to high price condominium property, which became a political preference.

Since 2006, building activity in Berlin has increased by an average of 32%. The analyst firm Bulwiengesa designated Berlin as “hotspot of development projects” in Germany (2014). Although affordable rental housing is increasingly in high demand, most projects still consist of high-priced condominiums. A longstanding development company in Berlin noted in a recent interview that “this kind of projects just meet 4% of the demand. Nevertheless their construction is increasing. Specially recently appeared developers focusses in that segment.” (6/2014) Lately, high price rental housing is being built primarily for private institutional investors. This often takes place through for -ward deals, which provide project developers with the opportunity not only to realize short-term investments, but also to attain a prompt high equity share for the initial investment.

Actors: New Constellations

The current trends in the real estate market have caused important changes in the local development scene: (1) an increasing number of project developers and builders offering new residential construction and (2) a change in the actor compositions and tasks. Project developers in Berlin are mostly German companies, one third of which are national firms that „re-discoverd“ Berlin in the last five years (Interview 5/2014). International developers represent more than 30% – a remarkable size for a traditional local industry. The nine most active firms in 2013 had built as much as 65% of all completed housing projects in the Berlin metropolitan area.

Condominium developers increasingly follow joint ventures with equity firms, or they tend to establish their own subsidiaries. Project developers which once specialized in other real estate markets are becoming increasingly dedicated to residential real estate (Bulwiengesa 2013).

Financing: Changing Strategies


Project financing has changed gradually since the 1980s. While previously lends were held by highly regulated banks, by 2000 were commercial banks who generally realized it (Green and Wachter 2010). After the financial crisis, commercial banks have lost their primacy in relation to regional and savings and mort-gage banks.

In regard to equity, capital developers draw increasingly on the following players (with increasing individual investment order of magnitudes in this order) (HTP 2013):
• Family Offices
• Closed-end Fonds
• Pension and Insurance Fonds
• German and International RE Private Equities [REPEs]

REPEs have high return expectations and are a particularly expensive financing model. Due to their willingness to invest, RE Private Equities are nevertheless on the rise.



Bulwiengesa AG (2013). Die Immobilienmärkte in der Metropolregion Berlin-Potsdam. Berlin.
Bulwiengesa AG (2014). Projektentwicklungen in den deutschen A-Städten 2014.
French, S., Leyshon, A. and Wainwright, T. (2011) Financializing space, spacing financialization,
Progress in Human Geography(35), S. 798–819.
Green, R. and Wachter, S. (2010). The Housing Finance Revolution, in: S. Smith and B. A. Searle (Eds.)
The Blackwell companion to the economics of housing, S. 414–446. Chichester et al: Blackwell.
Harvey D. (2012) Rebel cities: From the right to the city to the urban revolution. London: Verso.
HTP Hochtief Projektentwicklung GmbH (2013). Immobilienfinanzierung: Stabiles Umfeld.

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Laura Calbet is PhD student at the Center for Metropolitan Studies in Berlin and Assistant Professor and Researcher in the Department for Urban Design & Development at the Technische Universität Berlin. From Sept. to Dec. 2013 she was also guest researcher at York University in Toronto, Canada. Her research explores the financialized patterns of inner-city real estate development. Additional research interests include: planning history of Berlin, urban redevelopment in Barcelona and Berlin, public space in planning poli-tics, and the critical pedagogy of urban design. She is on the editorial board of the journal sub\urban. zeitschrift für kritische stadtforschung.
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