Absolutely true. My rent in the early '00s was equivalent to $200 / month for a 3 room apartment. Granted, I had a coal furnace in my bedroom, a tiny gas furnace in my living room and no heat in the kitchen or bathroom (except for a pull-string infra-red heater over the door for when you step out of the bathtub). Everything was cheap from beer to food to clubs to travel. I made half of what I made in the States but I didn't feel it at all.
Just to give people some perspective, this is very cheap to basically unattainable in Berlin today.
Assuming you want to live somewhere with good transit connections and fairly central (say, on the inner side of the Ringbahn[1] or close to it) a 3-room apartment (2 bedrooms+living room, let's say around 60-70 m^2) will likely cost you 500-600 eur not including heat (700+ including heat and utilities) if you don't inherit an old contract (in Germany landlords are limited in how much they can increase rent on a year by year basis for an ongoing contract, so if you get a new apartment you'll probably pay more than the previous tenant as the land lord will use this opportunity to increase your rent).
Overall tho it is still cheap for a western city. I think my expenses dropped almost to half what they were in Tel Aviv.
I can definitely see how that would work when a lot of the necessities of life are priced lower, in line with your lower salary. How did you feel about making purchases that are priced at a more global level? For example if you wanted to buy an Apple computer to do your development work on. I've always been curious about this as people don't tend to talk about it when discussing the cost of living in different geographic areas.
That stuff becomes comparatively more expensive, but still most of your expenses are for the basics (housing+ transit+ food probably add up to ~80-90% of most people's expenses) so it's not that big of a deal.
I had usually bought electronics from the USA when I knew of a friend coming to visit. They'd purchase it, bring it over and I'd pay them back. I avoided paying the VAT that way.
This is changing fast though. Places like Prenzlauer Berg and Friedrichshain-kKreuzberg, and more recently Neukölln are completely gentrified. The prices are rising fast and the "cool" people are moving on the the new squats and cheap run down properties. Property developers are leveraging the relative cheapness of the property market (compared to other capital cities) and trying to turn a fast buck (and doing os).
I'm not so sure that Berlin is really that cheap anymore.
Even though salaries might appear low, Berlin has a really good balance of culture + nice place to live + affordibility.