Good morning. I’m Irene Galea, a business reporter covering technology. Over the past few months, I’ve been reporting from Berlin as part of a fellowship that brought me to the economics desk of Die Welt, Germany’s newspaper of record. From there, I witnessed first-hand the increasingly acute pain being felt by businesses and consumers across Europe’s largest economy.
Between booming population growth, privatization and a sluggish pace of construction, housing costs have soared in the past 20 years, forcing a reckoning of the city’s “affordable” identity and driving a social rift between new and old residents. If that sounds familiar, you might be reading this from Canada. More on that below, but first:
In the news
Mystery solved: Wall Street powerhouse Blackstone Inc. is the $7-billion bidder for part of Rogers’s cellphone infrastructure business, Andrew Willis reports.
Show me the money: Canada’s banking lobbyists are calling for an overhaul of the financial crime reporting framework.
Ride like the wind: Brookfield is investing $2.3-billion in a U.K.-based offshore renewable energy operation.
Unleashed: Pharmacists are unfairly blocked from stocking drugs for pets, the Competition Bureau says.
Happening today
A small increase is expected from Canadian GDP growth estimates for August.
Apple Inc. and Amazon.com Inc. report earnings after markets close.
Rising housing costs are changing Berlin’s image as an ‘affordable’ city and pitting new and long-time residents against each other.Markus Schreiber/The Associated Press
In focus
How Berlin reflects ‘a new social and economic fault line’
When I first started sharing that I was going to be living in Berlin for the summer, reporting for The Globe as part of a fellowship, many people gave me the same response: ‘You’ll love the cheap rent!’
I quickly discovered that Berlin has outgrown its reputation for housing affordability. While the cost of living is still lower than in many European capitals, the city has seen the rents triple over the last two decades.
Although the housing markets in Berlin and my home city of Toronto had been shaped by different underlying policy and economic conditions, both now face similar housing problems: a lack of supply and growing frustration over government policy.
I was particularly surprised to learn how stark the difference is between new and old leases for comparable properties in the city. Navid Sani, a real estate agent I talked to for a story diving into Berlin’s growing affordability problem, told me that while his brother pays €600 per month for his apartment on an old contract, one of his clients recently signed a new lease for a comparable property paying €2,000.
Why does this matter? I think University of Toronto political science professor Alexander Reisenbichler expressed it well when he told me the housing gap has resulted in “a new social and economic fault line,” which is having wider consequences for the country’s political landscape. After a summer covering German politics, I saw the degree to which housing unaffordability is leading to frustrations often directed squarely at newcomers. I wasn’t surprised to see a 2023 academic study which found a strong correlation between rising rents and support for the far right.
Meanwhile, both Germany and Canada are looking at population declines in the coming decades that will likely drag on GDP. A sluggish housing market where family-size properties are out of reach for most does not present an encouraging picture for young people considering whether to have children. At least for Germany, the economic headwinds are not likely to calm for some time. Germany surprised economists yesterday when it reported small economic growth, but a recent KPMG analysis points only to moderate expansion in the coming years, with GDP growth of 0.8 per cent in 2025 and 1.3 per cent in 2026.
Despite the negativity about housing, I want to acknowledge one reality about Berlin: It remains an affordable city relative to many of its European counterparts. In particular, I found food and transit very accessible. Groceries were about a third the price of shopping in Canada. I was also able to travel to cities across Germany with the Deutschlandticket, a €49/month (about C$75) unlimited transit pass subsidized by the federal government. In Toronto, I spend nearly double that monthly on the TTC alone.
Now, I’ve traded back Brandenburg Gate for Union Station, and Unter den Linden for Yonge Street, but I’m still thinking about Berlin in all its vibrancy, despite the challenges it faces.
I hope that Canadian readers, particularly those interested in urban issues, will find the story of Berlin’s housing market evolution to be an interesting case study with applicable lessons for us, as well. Above all, it’s a reminder that the urban planning decisions made now will have lasting implications that are not easily undone.
Calling all Gen Zs
Are you under 30? Open to talking about your finances? The Globe is looking for young Canadians for our Paycheque Project series. It’s a non-judgmental look at how a working young person spends a month’s income: how much is going to rent, to debt repayment, to going out, to savings, holidays, car payments, exercise classes, pets or daycare. We’re especially interested in hearing from those living outside Canada’s big cities. Please contact personal finance editor Roma Luciw if you have questions or would like to participate.
The lookout
On our radar and reading list
Tick tock, TikTok: Despite the social media platform’s meteoric growth and its more than 1 billion global users, its future in North America is under threat.
Election watch: There are five days left before the U.S. election. You can follow our live coverage here.
Soccer and suds: Do they go well together? Actors Ryan Reynolds and Rob McElhenney are buying Wrexham Lager brewery after rejuvenating the city’s soccer team.
Morning markets
Global markets sank as warnings from Meta Platforms and Microsoft about rising artificial intelligence-related costs dampened optimism regarding megacaps. Wall Street futures and TSX futures were in negative territory after markets closed lower yesterday.
Overseas, the pan-European STOXX 600 was down 0.85 per cent in morning trading. Britain’s FTSE 100 fell 0.79 per cent, Germany’s DAX dropped 0.49 per cent and France’s CAC 40 gave back 0.91 per cent.
In Asia, Japan’s Nikkei closed 0.5 per cent lower, while Hong Kong’s Hang Seng slid 0.31 per cent.
The Canadian dollar traded at 71.82 U.S. cents.