Something I threw together after coming across this documentary about the Chinese real estate bubble. Long ago on soc.history.what-if, I remember reading a somewhat similar story, which even years later inspires me, too.
GERMANY'S GHOST CITIES
REPORTER: Christopher Laville
These are satellite images of one of Germany's newest showpiece cities, a sprawling urban centre in the Warthegau complete with public buildings, hotels and apartment blocks and this is the view from the ground. 11am on a Thursday morning and Wesselstadt's CBD is deserted, shops unoccupied, hundreds of apartments uninhabited.
All the shops in this mall are empty, not that that worries the government, because they're simply more concerned with maintaining economic growth and one way of achieving that is building cities like this one. The big question, though, is how much longer all these shops and properties can remain vacant?
But all around me, the construction of this metropolis goes on and here in the eastern city of Kuhnburg, another example. This is the East Warthe Mall - toy shop owner, Kurt Wagner, is doing his best to keep his spirits up but is already after 2pm and he's yet to serve a single customer.
REPORTER: Do you get very lonely in here?
KURT WAGNER, TOY SHOP OWNER (Translation): It is a bit boring looking after the shop here – there are too few customers.
But then, slow days are what he's used to.
REPORTER: When was the last time you sold something?
KURT WAGNER (Translation): Yesterday – I sold one toy. Once it took four or five days
His shop is a rare sight in the Warthe Mall. The majority of this vast shopping centre remains as empty as it did when it opened six years ago. Back then, developers boasted that it would become the region's biggest shopping mall, with plans for 500 shops that would attract 40,000 shoppers a day - the mall was heralded by the New York Times as proof of Germany's astonishing new consumer culture finally taking root in the eastern provinces. But today, the not so great Warthe Mall, as it is known, is a glaring indication that this consumer culture has been grossly overestimated.
A gondola ride through the mall lasts 20 minutes and takes you past an unsettling and almost unending vista of emptiness. For the few workers kept on to maintain this vast and now eerie complex, it is boring and lonely work and already, there are signs of creeping neglect. Even filming an empty shopping mall is a sensitive issue in Germany - police arrived and ordered us out but the mall is so vast, it was easy to slip back in unnoticed and just like in the city of Wesselstadt, building goes on.
Despite repeated requests, the mall's management refuse to talk to Dateline, but KURT WAGNER wonders if the mall may become another victim of the government's obsession with big infrastructure projects.
REPORTER: Do you think that the East Warthe Mall will be around in five years time?
KURT WAGNER (Translation): It is hard to tell, we’ll have to see what happens next year. My feeling is, they said Level Two was all leased out, if it is true and the customers come, there may be a chance, otherwise it’s hopeless.
We're on our way to another new city, Ehrlichshaven, a three-hour drive from the not so great mall. As you enter the city, the touts pounce and a well-rehearsed sales pitch begins.
MAN (Translation): Inspecting properties? Two minutes from here. Have you seen any?
WOMAN (Translation): In May we will have another site for sale in the city centre.
Ehrlichshaven is a city carved out of agricultural land and designed for 2 million people. That ambitious forecast, though, appears to be wildly out of kilter with reality because, according to even Germany's state-controlled media, 70% of these new units remain unoccupied.
REPORTER: Is eastern Germany experiencing a property bubble?
LÉONIE BERLO, ROYAL BANK OF CANADA: Absolutely. A property bubble like which I don't think we've ever seen. It is said that there are 5 million empty apartments in the German East.
REPORTER: 5 million?
LÉONIE BERLO: 5 million. What you have, in a sense, is the German government trying to swim against the current. Since economic liberalization began in the 1980s - before that, really - but especially since then, the trend has been for Germans to move west, not east, to the Rhineland, not the Warthegau, the Ruhr, not the Weichselgau, and certainly not the Reichskommissariats.
LÉONIE BERLO is a Montreal-based analyst who has been investigating Germany's residential and commercial real estate market. She maintains that there's massive oversupply and over valuation of properties right across the German East.
LÉONIE BERLO: It's essentially the modern equivalent of building pyramids. It doesn't really add to the betterment of lives, but it adds to the growth of GDP.
And maintaining economic growth is the government's number one priority.
LÉONIE BERLO: It's basically happening because Germany is a command economy and the German government can dictate where the resources are spent.
REPORTER: And so, if the order goes out to build, district governments build?
LÉONIE BERLO: That's right. If the central government sets a GDP target, they have to meet the target and the easiest way to do it is just to build.
REPORTER: Isn't all this construction a good thing? It's creating jobs and getting the economy moving? That's a good thing?
LÉONIE BERLO: People forget that it is not the quantity of GDP that matters but the quality and essentially, they're building things for where there's no demand and so they're creating a large problem for the future. Again, swimming against the current. Today's Germans, by and large, don't want to fill up the old lebensraum, even if the official goal has shifted from a nation of soldier-farmers to one of urban workers.
Prices for units here range from $150,000 to $200,000 - a fortune in a country where the average worker's annual wage is around $15,000. But units here are selling - the vast majority as investment properties whose owners live in other parts of Germany. The agent bundled this prospective buyer away before we could talk to her.
REPORTER: You've come today - you've had a look around - what was your impression?
LÉONIE BERLO: It's pretty alarming. It's incredibly interesting - I don’t think that there are many places in the word like this. I mean, we've seen empty apartments, empty condominium projects. In many respects, it's a manifestation of the reality of the German East, beneath the surface propaganda and Potemkin villages, or Potemkin Autobahns, if you will.
REPORTER: Do you imagine that any of these apartments will be occupied in five years?
LÉONIE BERLO: I think that the occupancy rate in five years will still be around 25%, but if they bring the prices down to close to zero, some people will move in.
REPORTER: Well here’s the thing - you got millions of Germans who, like people anywhere else, they dream of owning a home, and they can't.
LÉONIE BERLO: That's right - these are far too expensive for them. The Eastern Ministry has built units too big, too well and too many.
Millions of expensive empty homes and millions of Germans who can't afford to live in them. Jürgen Bündchen is one of them - his rented home lies at the end of a narrow alley in an outlying borough of the capital Germania. He knows that one day soon, all this will be demolished. In its place, more upmarket condominiums like the ones that tower above his neighbourhood - a daily reminder of his own frustrated efforts to buy a home. He and his wife live in a single room off a small courtyard.
JÜRGEN BÜNDCHEN (Translation): 10 households, two people per household.
There's a communal sink and toilet - hallmarks of a unit built in the 1970s as temporary housing for Germanians displaced by the construction of Siegallee, and still in use thirty-five years later. Despite German propaganda about the value of children, there is no place for them here, which is why their daughter remains with Bündchen's parents in Styria - they see her once a year.
JÜRGEN BÜNDCHEN (Translation): It’s no good, we have been working in Germania for years, we want to but a property but prices are too high – honestly, we just can’t afford to buy. People speculating in the market have pushed prices too high – we need the government to intervene.
Jürgen and his wife both work six days a week in a beauty parlour, their combined salaries are around $900 a month, of which a quarter goes on rent. He says owning a home should not be a dream but a basic human right.
JÜRGEN BÜNDCHEN (Translation): If the government considered us and provided budget housing as part of our human rights - that would be the right thing to do. I am not optimistic now, I don’t like what the government is doing. Everything has changed since the old days.
Adolf Muster also knows about the difficulties of home ownership, he shares a two bedroom apartment with nine other people, including a married couple. Ironically, he's a government property developer. Three men sleep in this room with Mr Muster sharing a bed - none of which is exceptional here in Germany, until you remember all those millions of homes that are empty. Something he didn't want to talk about.
ADOLF MUSTER (Translation): I can’t tell you my views because I work in the property sector, I know a lot about it and if I talk about it I will get into trouble.
But trouble is looming if the lack of affordable housing continues, warns this prominent sociologist.
PROFESSOR MARTIN VON STOSCHBERG, SOCIOLOGIST, HUMBOLDT UNIVERSITY, GERMANIA (Translation): What worries me most is polarisation, according to the Führer, if it leads to polarisation, then our reform has failed. Right now, Germany is polarised – it continues to be polarised – that is a big worry.
He fears a deepening of social divisions.
PROFESSOR MARTIN VON STOSCHBERG (Translation): It is clear that polarisation will cause conflicts in society – poor people may come out and start a revolution, everything Germany has worked to prevent since the 1930s.
A two-hour drive from Germania, I'm being shown a duplex with an asking price of almost $300,000. It's a development called Grüninsel, or Green Island, though it is anything but outside. From the window, a smoggy view of another old neighbourhood developers have earmarked for demolition.
REPORTER: So this will go next?
WOMAN: Yes.
An unlikely prediction, considering buyers are required to pay 50% of the asking price upfront and the balance within three years. Such stringent terms, which keeps so many workers out of the market, are also the reason why Germany has yet to experience a US-style credit implosion.
AGENT (Translation): This is a good place for you high-income earners, it’s quiet and the environment is good.
REPORTER: Who will come to live here?
WOMAN: People who can afford a house in Germania.
REPORTER: But they haven't come yet?
WOMAN: No.
And only months after the first tenants moved in here, the For Sale signs and For Rent signs are already appearing. Germany's authorities are trying to cool their overheated economy with a series of financial controls. But there are dangers.
LÉONIE BERLO: It can't stay this way because we're in the upswing of a bubble, and when the bubble bursts, it will impoverish vast numbers of people.
REPORTER: Will there be anger and disgruntlement?
LÉONIE BERLO: Yes, it increases the chances that you get some form of social unrest.
THOMAS KATIC: Christopher Laville reporting there. And there are more satellite photos from the report showing the scale of those cities and their empty streets on our website.
GERMANY'S GHOST CITIES
REPORTER: Christopher Laville
These are satellite images of one of Germany's newest showpiece cities, a sprawling urban centre in the Warthegau complete with public buildings, hotels and apartment blocks and this is the view from the ground. 11am on a Thursday morning and Wesselstadt's CBD is deserted, shops unoccupied, hundreds of apartments uninhabited.
All the shops in this mall are empty, not that that worries the government, because they're simply more concerned with maintaining economic growth and one way of achieving that is building cities like this one. The big question, though, is how much longer all these shops and properties can remain vacant?
But all around me, the construction of this metropolis goes on and here in the eastern city of Kuhnburg, another example. This is the East Warthe Mall - toy shop owner, Kurt Wagner, is doing his best to keep his spirits up but is already after 2pm and he's yet to serve a single customer.
REPORTER: Do you get very lonely in here?
KURT WAGNER, TOY SHOP OWNER (Translation): It is a bit boring looking after the shop here – there are too few customers.
But then, slow days are what he's used to.
REPORTER: When was the last time you sold something?
KURT WAGNER (Translation): Yesterday – I sold one toy. Once it took four or five days
His shop is a rare sight in the Warthe Mall. The majority of this vast shopping centre remains as empty as it did when it opened six years ago. Back then, developers boasted that it would become the region's biggest shopping mall, with plans for 500 shops that would attract 40,000 shoppers a day - the mall was heralded by the New York Times as proof of Germany's astonishing new consumer culture finally taking root in the eastern provinces. But today, the not so great Warthe Mall, as it is known, is a glaring indication that this consumer culture has been grossly overestimated.
A gondola ride through the mall lasts 20 minutes and takes you past an unsettling and almost unending vista of emptiness. For the few workers kept on to maintain this vast and now eerie complex, it is boring and lonely work and already, there are signs of creeping neglect. Even filming an empty shopping mall is a sensitive issue in Germany - police arrived and ordered us out but the mall is so vast, it was easy to slip back in unnoticed and just like in the city of Wesselstadt, building goes on.
Despite repeated requests, the mall's management refuse to talk to Dateline, but KURT WAGNER wonders if the mall may become another victim of the government's obsession with big infrastructure projects.
REPORTER: Do you think that the East Warthe Mall will be around in five years time?
KURT WAGNER (Translation): It is hard to tell, we’ll have to see what happens next year. My feeling is, they said Level Two was all leased out, if it is true and the customers come, there may be a chance, otherwise it’s hopeless.
We're on our way to another new city, Ehrlichshaven, a three-hour drive from the not so great mall. As you enter the city, the touts pounce and a well-rehearsed sales pitch begins.
MAN (Translation): Inspecting properties? Two minutes from here. Have you seen any?
WOMAN (Translation): In May we will have another site for sale in the city centre.
Ehrlichshaven is a city carved out of agricultural land and designed for 2 million people. That ambitious forecast, though, appears to be wildly out of kilter with reality because, according to even Germany's state-controlled media, 70% of these new units remain unoccupied.
REPORTER: Is eastern Germany experiencing a property bubble?
LÉONIE BERLO, ROYAL BANK OF CANADA: Absolutely. A property bubble like which I don't think we've ever seen. It is said that there are 5 million empty apartments in the German East.
REPORTER: 5 million?
LÉONIE BERLO: 5 million. What you have, in a sense, is the German government trying to swim against the current. Since economic liberalization began in the 1980s - before that, really - but especially since then, the trend has been for Germans to move west, not east, to the Rhineland, not the Warthegau, the Ruhr, not the Weichselgau, and certainly not the Reichskommissariats.
LÉONIE BERLO is a Montreal-based analyst who has been investigating Germany's residential and commercial real estate market. She maintains that there's massive oversupply and over valuation of properties right across the German East.
LÉONIE BERLO: It's essentially the modern equivalent of building pyramids. It doesn't really add to the betterment of lives, but it adds to the growth of GDP.
And maintaining economic growth is the government's number one priority.
LÉONIE BERLO: It's basically happening because Germany is a command economy and the German government can dictate where the resources are spent.
REPORTER: And so, if the order goes out to build, district governments build?
LÉONIE BERLO: That's right. If the central government sets a GDP target, they have to meet the target and the easiest way to do it is just to build.
REPORTER: Isn't all this construction a good thing? It's creating jobs and getting the economy moving? That's a good thing?
LÉONIE BERLO: People forget that it is not the quantity of GDP that matters but the quality and essentially, they're building things for where there's no demand and so they're creating a large problem for the future. Again, swimming against the current. Today's Germans, by and large, don't want to fill up the old lebensraum, even if the official goal has shifted from a nation of soldier-farmers to one of urban workers.
Prices for units here range from $150,000 to $200,000 - a fortune in a country where the average worker's annual wage is around $15,000. But units here are selling - the vast majority as investment properties whose owners live in other parts of Germany. The agent bundled this prospective buyer away before we could talk to her.
REPORTER: You've come today - you've had a look around - what was your impression?
LÉONIE BERLO: It's pretty alarming. It's incredibly interesting - I don’t think that there are many places in the word like this. I mean, we've seen empty apartments, empty condominium projects. In many respects, it's a manifestation of the reality of the German East, beneath the surface propaganda and Potemkin villages, or Potemkin Autobahns, if you will.
REPORTER: Do you imagine that any of these apartments will be occupied in five years?
LÉONIE BERLO: I think that the occupancy rate in five years will still be around 25%, but if they bring the prices down to close to zero, some people will move in.
REPORTER: Well here’s the thing - you got millions of Germans who, like people anywhere else, they dream of owning a home, and they can't.
LÉONIE BERLO: That's right - these are far too expensive for them. The Eastern Ministry has built units too big, too well and too many.
Millions of expensive empty homes and millions of Germans who can't afford to live in them. Jürgen Bündchen is one of them - his rented home lies at the end of a narrow alley in an outlying borough of the capital Germania. He knows that one day soon, all this will be demolished. In its place, more upmarket condominiums like the ones that tower above his neighbourhood - a daily reminder of his own frustrated efforts to buy a home. He and his wife live in a single room off a small courtyard.
JÜRGEN BÜNDCHEN (Translation): 10 households, two people per household.
There's a communal sink and toilet - hallmarks of a unit built in the 1970s as temporary housing for Germanians displaced by the construction of Siegallee, and still in use thirty-five years later. Despite German propaganda about the value of children, there is no place for them here, which is why their daughter remains with Bündchen's parents in Styria - they see her once a year.
JÜRGEN BÜNDCHEN (Translation): It’s no good, we have been working in Germania for years, we want to but a property but prices are too high – honestly, we just can’t afford to buy. People speculating in the market have pushed prices too high – we need the government to intervene.
Jürgen and his wife both work six days a week in a beauty parlour, their combined salaries are around $900 a month, of which a quarter goes on rent. He says owning a home should not be a dream but a basic human right.
JÜRGEN BÜNDCHEN (Translation): If the government considered us and provided budget housing as part of our human rights - that would be the right thing to do. I am not optimistic now, I don’t like what the government is doing. Everything has changed since the old days.
Adolf Muster also knows about the difficulties of home ownership, he shares a two bedroom apartment with nine other people, including a married couple. Ironically, he's a government property developer. Three men sleep in this room with Mr Muster sharing a bed - none of which is exceptional here in Germany, until you remember all those millions of homes that are empty. Something he didn't want to talk about.
ADOLF MUSTER (Translation): I can’t tell you my views because I work in the property sector, I know a lot about it and if I talk about it I will get into trouble.
But trouble is looming if the lack of affordable housing continues, warns this prominent sociologist.
PROFESSOR MARTIN VON STOSCHBERG, SOCIOLOGIST, HUMBOLDT UNIVERSITY, GERMANIA (Translation): What worries me most is polarisation, according to the Führer, if it leads to polarisation, then our reform has failed. Right now, Germany is polarised – it continues to be polarised – that is a big worry.
He fears a deepening of social divisions.
PROFESSOR MARTIN VON STOSCHBERG (Translation): It is clear that polarisation will cause conflicts in society – poor people may come out and start a revolution, everything Germany has worked to prevent since the 1930s.
A two-hour drive from Germania, I'm being shown a duplex with an asking price of almost $300,000. It's a development called Grüninsel, or Green Island, though it is anything but outside. From the window, a smoggy view of another old neighbourhood developers have earmarked for demolition.
REPORTER: So this will go next?
WOMAN: Yes.
An unlikely prediction, considering buyers are required to pay 50% of the asking price upfront and the balance within three years. Such stringent terms, which keeps so many workers out of the market, are also the reason why Germany has yet to experience a US-style credit implosion.
AGENT (Translation): This is a good place for you high-income earners, it’s quiet and the environment is good.
REPORTER: Who will come to live here?
WOMAN: People who can afford a house in Germania.
REPORTER: But they haven't come yet?
WOMAN: No.
And only months after the first tenants moved in here, the For Sale signs and For Rent signs are already appearing. Germany's authorities are trying to cool their overheated economy with a series of financial controls. But there are dangers.
LÉONIE BERLO: It can't stay this way because we're in the upswing of a bubble, and when the bubble bursts, it will impoverish vast numbers of people.
REPORTER: Will there be anger and disgruntlement?
LÉONIE BERLO: Yes, it increases the chances that you get some form of social unrest.
THOMAS KATIC: Christopher Laville reporting there. And there are more satellite photos from the report showing the scale of those cities and their empty streets on our website.