The Political Context of Real Estate Development

Abstract

Real estate supply and demand appear to be largely market forces, but in fact they are shaped by public policies on the local and national level. Berlin is an example of a city whose central city property market has been heavily influenced by policies growing out of the extraordinary circumstances attending German reunification. Both the local state and the federal government have taken steps that have either inten tionally or inadvertently impacted the demand for and supply of property; often the various arms of the state have acted at cross-purposes in pursuing their goals. Demand for commercial real estate has been pushed by the new interest in Berlin accompanying the decision to make it the capital of united Germany. Federal subsidies designed to encourage investment in the former East Germany have further fuelled demand. The supply of central property has been shaped by the political and legal issues surrounding privatization of the state-owned holdings in the city's eastern half, and the unclear policy goals of the vari ous arms of local and national state responsible for land disposition.