Ludorf Manor, in the former East Germany, was a wreck when Manfred Achtenhagen bought it in 1998. Built in 1698 by Baron von Knuth, it had been plundered and expropriated as "class-enemy property" by the invading Soviet Army in 1945 and then neglected during half a century of communism. But two years and €2.5 million later, the 30-room palace has been reborn as a stylish country hotel, an hour and a half north of Berlin. Bookings are up as German, Swiss and Swedish tourists discover the vast unpopulated landscape of lakes and nature reserves nearby.
For Westerners, this was long terra incognita, hidden behind the Iron Curtain. When the borders opened in 1989, visitors largely stayed away. Hotels were lousy, roads poor and the food largely inedible. Restitution wrangles and other post-communist legal hassles all but paralyzed the housing market. But over the past decade, all that's changed--most visibly along the newly discovered Baltic coast.
On the German islands of Rügen and Usedom, immaculately restored 19th-century villas line the beaches like pearls on a string. The magnificent seaside residence of the Mecklenburg Court at Heiligendamm has been reborn as one of the country's poshest resorts. Elsewhere, "people's resorts" where East German worker-heroes once frolicked in the Baltic waves for a couple of marks a day are now elegant watering holes for wealthy Western clientele. Better-off Berliners have bought up everything from Potsdam's suburban mansions to simple farmsteads in the lake district north of the city. "The market's been swept clean," Achtenhagen says. Already, investors are eying the regions beyond, waiting for the day--in 2009--when the property market in next-door Poland is opened up to foreign private buyers.
Still, there are some treasures to be had. In Mecklenburg, northeast of the capital, some 2,200 manor houses (like Ludorf) stand empty; only 280 have found buyers. Among them is the Bothmer Palace, a stone's throw from the Baltic. Set among 16 hectares of ancient oaks and lindens, the 6,000-square-meter Baroque pile was inspired by Blenheim Palace near Oxford. It's yours for a "symbolic" €1--but renovation would take up to €20 million. Hundreds more of these aristocratic estates are sprinkled along the Baltic coast from Poland all the way to Estonia.
In the seaside town of Pütnitz, it's the more recent past that's become a magnet. There, Torsten Maier runs a museum of commie-era weaponry out of an old Luftwaffe airplane hangar. Visitors can test-drive old People's Army armored trucks or ride in a Soviet T-55 tank. The town of Tutow has put itself on the map with a GDR museum--complete with a restaurant where uniformed waiters dish up Soviet-era delicacies, like the gruesomely gristly cut of pork called Schweinekamm. Hey, whatever sells.