Potsdam Is Better Than Hamptons as Millionaires Buy Villas

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Pedestrians walk past stores on Brandenburger Street in Potsdam.

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Photographer: Michele Tantussi/Bloomberg

Pedestrians walk past stores on Brandenburger Street in Potsdam. Close

Pedestrians walk past stores on Brandenburger Street in Potsdam.

Photographer: Michele Tantussi/Bloomberg

Visitors look at property on display in a real estate agent's window in Potsdam. Close

Visitors look at property on display in a real estate agent's window in Potsdam.

Photographer: Michele Tantussi/Bloomberg

A sign advertising a house for sale hangs outside the property in the Nauener Vorstadt district of Potsdam. Close

A sign advertising a house for sale hangs outside the property in the Nauener Vorstadt district of Potsdam.

Photographer: Michele Tantussi/Bloomberg

A sign advertising a house for sale hangs outside the property in the Nauener Vorstadt district of Potsdam. Close

A sign advertising a house for sale hangs outside the property in the Nauener Vorstadt district of Potsdam.

Photographer: Michele Tantussi/Bloomberg

Potsdam was chosen by Friedrich as the site for Sanssouci , the summer palace he had built in the 18th century to allow him to escape the cares of office and court pomp of the capital. Close

Potsdam was chosen by Friedrich as the site for Sanssouci , the summer palace he had built in the 18th century to... Read More

Photographer: Michele Tantussi/Bloomberg

Cyclists approach construction cranes on the site of the new government building and Nicolas church in Potsdam. Close

Cyclists approach construction cranes on the site of the new government building and Nicolas church in Potsdam.

Potsdam, where Prussia’s Friedrich the Great hosted the philosopher Voltaire and plotted wars to expand his kingdom, is enjoying a post-communist revival that’s pushed up home prices to the highest in eastern Germany. And there’s more to come.

The city, 27 kilometers (17 miles) southwest of downtown Berlin by car, has attracted corporate executives and figures from the arts world since German reunification in 1990. Residents include Hasso Plattner, co-founder of SAP AG (SAP), Axel Springer AG (SPR) Chief Executive Officer Mathias Doepfner, fashion designer Wolfgang Joop and film director Volker Schloendorff.

“If Berlin is Germany’s New York, Potsdam is better than the Hamptons or Long Island because the commute is shorter and it has everything from shopping to culture,” said Victoria von Koeckritz, a real-estate broker at Engel & Voelkers based in the city. The firm has 195 offices in Germany, 29 in the U.S. and outlets in 37 other countries.

The average price for a house in Potsdam is about 406,000 euros ($586,000), according to a survey last month by Focus magazine and Empirica, a research firm with three German offices. That made the capital of the state of Brandenburg the most expensive city in eastern Germany, pushing Berlin into second place with 327,000 euros. Potsdam real estate will appreciate by 41 percent through 2020, the survey predicted.

Sanssouci Palace

Potsdam was chosen by Friedrich as the site for Sanssouci, the summer palace he had built in the 18th century to allow him to escape the cares of office and court pomp of the capital. This, along with palaces and parks at Babelsberg, Sacrow and other parts of Potsdam were added to Unesco’s list of world heritage properties in 1990.

In all, the city has 150 royal buildings dating from 1730 to 1916 and 500 hectares (1,235 acres) of parkland, according to Unesco. It’s surrounded on three sides by lakes and the Havel River.

“There’s a lot of pressure for Potsdam to grow, but there’s simply no space and not enough properties,” said Anja Farke, who also works at Engel & Voelkers’ local office. “The royal parks, lakes and monuments hem in the city and Potsdam’s growth potential is really limited.”

The cost of land is rising as developers compete for sites in the best parts of Potsdam, such as the Berliner Vorstadt, Babelsberg and the Nauener Vorstadt. Prices climbed to as high as 400 euros a square meter in 2010, an increase of as much as 60 euros from a year earlier, a report by the city council last month showed.

Babelsberg Studios

Bankers, industrialists and film stars from Berlin started building villas in Babelsberg, the Potsdam neighborhood best known for its film studios, at the end of the 19th century. They include Plattner’s house on Griebnitzsee lake, which was designed by Bauhaus architect Ludwig Mies van der Rohe.

British Prime Minister Winston Churchill used the building during the 1945 Potsdam Conference, also attended by U.S. President Harry S. Truman and Soviet leader Josef Stalin, that decided the post-World War II order after Nazi Germany’s defeat.

A Babelsberg house designed by Albert Speer, Adolf Hitler’s architect, is being sold by Engel & Voelkers for 1.3 million euros. Built in 1936, the house has 530 square meters, an outdoor pool and original floor tiles and oak floors.

Earlier this year, the broker sold the Villa Sarre in Babelsberg, an Italian renaissance-style house built in 1906 that was listed for 4 million euros. Farke declined to give the sales price.

New Neighborhoods

Since the Berlin Wall fell, billions of euros have been spent by the state and private investors to spruce up Potsdam’s long-neglected palaces, villas and apartment blocks and to build houses, said Jutta Moll, an official at Potsdam’s business development bureau.

“A number of completely new neighborhoods have been built,” she said. They include Bornstedt, a borough that borders Sanssouci Park.

The local population increased to more than 155,000 in 2010 from less than 128,000 in 1999, according to official statistics, and it may climb to 165,250 by 2015. Berlin has 3.4 million inhabitants, more than any other German city.

Potsdam’s house prices are still lower than those of western Germany’s wealthiest cities. The average price for Munich is about 679,000 euros, the highest in the country, according to the Focus survey. Frankfurt has an average value of 543,000 euros, while Hamburg’s is 436,000 euros.

War Damage

There’s still work to be done. The Prussian kings’ palace, which was demolished by the communists after sustaining war damage, is being reconstructed and will house Brandenburg state’s Landtag, or parliament, when it’s completed in 2013. SAP’s Plattner donated 20 million euros for the project.

Potsdam served for centuries as both a Prussian royal city and a military garrison. This military tradition runs from the 18th century through the German Empire under the Kaiser, the Nazis, the stationing of Soviet Red Army forces in and around the city from 1945 to 1994, up to today with the German army’s Operations Command Center in the suburb of Geltow.

Investors can still acquire a piece of the city’s military past: a former riding hall that was used by the army is also due to be renovated and converted into homes. Other projects include the Chateau Palmeraie, a red-brick military barracks, restored and marketed by developer Das Baudenkmal.de.

Tax Benefits

Potsdam’s listed historical properties are popular with investors because they can be used to write off tax, the city’s 2010 property report said.

“People who buy to rent can write off 100 percent of the restoration costs against their income tax over 12 years,” Joachim Bongard, chief executive officer of Das Baudenkmal.de, said by telephone. “In Potsdam, that’s generally 60 percent to 75 percent of the total sales price.”

Still, much of Potsdam’s residential properties will have limited appeal: About 40 percent of the city’s apartments are precast concrete blocks dating from the communist era, such as those in the Waldstadt II district, said Katrin Schmidt, a city land registry official.

Potsdam’s biggest problem is traffic jams because the main street through the center of the city has only two lanes, Engel & Voelkers’s Farke said. The road can’t be widened because it borders historic buildings and parks, she said.

“For many people, Berlin is too big, too loud, too dirty and too poor,” Farke said. “Yet let’s be fair: A lot of people wouldn’t live in Potsdam if it weren’t for Berlin.”

To contact the reporter on this story: Leon Mangasarian in Berlin at lmangasarian@bloomberg.net.

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Andrew Blackman at ablackman@bloomberg.net.

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