Huge potential as Berlin property goes nowhere

By Erik Kirschbaum

BERLIN (Reuters) - Frank Roszak, a good-humored Berlin butcher with a friendly smile, bought a spacious 10-room house in a pleasant suburb just west of the German capital city for $1.3 million about 16 years ago.

Two years ago he put the two-storey house with its leafy 1.5-hectare garden on the market for 500,000 euros ($790,000). It's been months since the last prospective buyer left -- without making an offer.

"I thought it was a great investment at the time and prices would rise," said Roszak, whose smile disappears when asked about his un-sellable house. "I thought I was all set to become a property tycoon. Obviously things didn't work out."

His is not a tale of suddenly slumping house prices: it's the property market in Berlin. Other cities may be smarting from softening prices but Berlin, like many parts of Germany, never had a boom and has long been a veritable black hole for investors and a nightmare for homeowners.

"Berlin is a metropolis with provincial prices," said Christine Schaefer, a property analyst at DZ Bank in Frankfurt.

Of course, there are some advantages to this: there's no turmoil from the broad market slump, and talk at dinner parties rarely centers on real estate. Also, as real estate agents and some economists note, it gives the market huge potential.

"Isn't it better to buy into a market that's come down for a decade than invest in a market where the party's over?" said Tobias Just, a real estate analyst at Deutsche Bank.

One problem: to realize that potential looks like taking a very long time. Hopes rise, but the market doesn't.