A lot of this has to do with Berlin's history. When the wall was still standing, west Berlin wasn't the most desirable place to live in Western Germany, it being basically an island in the communist east. So while cities in the West grew wealthy with industry Berlin was always the special case, not exactly a place for major industry to take root. It also became a haven for artists, musicians, intellectuals, homosexuals, anarchists, and other people not willing to take part in the mandatory military service that was required when you lived in the West (Berlin residents were exempt).

Real estate-wise Berlin has (or at least had until recently) a surplus of vacancies: both apartments and commercial buildings. This is partly due to fluctuations in population throughout its history, and steep declines in manufacturing and population during the wall years from their pre-WW2 heights. There were also huge swaths of prime central real estate throughout the city where the wall once stood, that was unusable until it came down.

What you end up with is a city that was originally planned and built for more people than live there, with vacant factories, warehouses, and office buildings from yesteryear that are readily and cheaply repurposed.

Berlin's population is growing these days though, and internationals, people from other parts of Europe, and other parts of Germany are flocking to the city. This means rent prices are on the rise, and vacancy is dropping. It's still way cheaper than any other major European city — for now.

Before the war, Berlin was a major industrial center, with big arms manufacturers and heavy industry. After the war, the Allies demolished much of the industry -- Siemens, for instance, moved to Munich. With the division of he city, many people moved away, leaving postwar Berlin with a loss of almost a third of its population. Since then, the city hasn't recovered its peak population, leaving many empty houses and low rents. In addition, the economy in Berlin has always been, and still is, very weak, and unemployment is high. All this helps to keep the cost of living low (even if, Berlin having become capital and sort of a hip place, it's higher now than it was 15 years ago).

I talked to the CEO of a Berlin-based crypto appliance company and he literally called the place "off-shore". Berlin is located in former East Germany, so it's totally separated from the rich former West German states where all the thriving export industry is. He told me they have practically no customers in their vicinity. They apparently can easily find staff, due to the attractiveness of the city and the various universities there, but all their customers are located in former West Germany or in other countries.

If you go to southern German states like Bayern, Baden-Württemberg or Hessen, cost of living is much higher in the larger cities there than in Berlin. That's because of the export industry which has been able to grow there for the last decades, and the resulting abundance of high paying jobs.

Because it has no huge financial sector unlike New York or London. Germany's Stock-Market is located in Frankfurt.

Also after reunification, East-Berlin was vastly unpopulated, people moving into the already modern West-Germany, while the former GDR was being restored. Nowadays there is hardly any differnece between East- and West-Berlin, but there is uninhabitated room. It is getting fewer though.

I'd say the roots of that still lie in the post war structures of Germany. You know, the division of Berlin, the GDR. That's still just 23 years ago. The city center was first bombed and then at the frontiers, so it was cheap - to put it simple. East Berlin was / is especially cheap. Prices have however been increasing quickly for some years now. Gentrification is a "problem" of many parts of Berlin. And it's still cheap in comparison to Munich or Hamburg, not to speak of London.

Anyone spent a winter in Berlin? It's incredibly cold. Traveling around the city on bicycle, train etc is great during the pleasant summer months but it's literally painful during the winter.

The capital used to be in Bonn. Berlin was separated by the Berlin Wall for about 45 years so it's still in the process of resurrection.

i can think of two reasons from the top of my head. first, when germany and berlin were separated for decades, the east was vastly neglected. after the wall came down, huge amounts of east germans moved to the west all over germany - thus leaving berlin sort of empty and with an abundancy of space and real estate. second, having been mostly isolated after ww2, german banks and heavy industry etc settled anywhere but in berlin. economically, this still hurts berlin today. culturally, this makes berlin more of a place for creatives and free minded people who create their own paths rather than corporate suits. i'm building a startup here and it's an amazing place to be!

Berlin has structural issues and capital / politics aren't creating many jobs. The spending power lies in the western / southern states of Germany, not north eastern states.