25th September, 2020

Buying property in Germany: Everything you need to know

Buying property in Germany: Everything you need to know

Have you considered buying property in Germany? From lively modern cities to historic old towns, tranquil lakes and woodland, Germany has it all. If your heart still yearns for more, residents can take advantage of the nine countries bordering Germany, offering skiing in the Alps, Provincial vineyards, Italian markets or the eclectic culture of Amsterdam, all easily accessible by car or train. Those considering buying a property within and outside of Germany can reap the benefits of rising house prices and safe investments.

On Thursday 24th September, we were joined by Michael Heming, CEO of Fine & Country Germany, Austria & Switzerland in our fourth webinar of our Worldwide Wanderlust Webinar series. For those looking to relocate to Germany or invest in property overseas, Michael revealed all about the German property market, how estate agency operates differently and the benefits to living in and owning properties in Germany.

To join hundreds of thousands of other expats in their journey to relocate and invest in property in Germany, we reveal all you need to know.

WATCH THE WEBINAR

Overview of the German property market

The German property market is very stable and has coped notably well with the coronavirus pandemic. Demand for residential property is high and there is a low supply in the market, meaning prices will only continue to rise. Depending on the location, investors are even willing to accept yields of only 3%.

In comparison to the UK and US a relatively low number of Germans own their homes, with just under half of the population owning their own homes, making them the second lowest in Europe after Switzerland!

Unsurprisingly, the most sought-after areas for buying property have the highest prices and are in the following seven locations, known as the “Big 7” cities:

• Berlin

• Düsseldorf

• Frankfurt am Main

• Hamburg

• Cologne

• Munich

• Stuttgart

In fact, even the areas surrounding these cities benefit from a high demand for properties.

As the year continues to recover, the overall economy is expected to only experience a 4.6% decrease for the year 2020. In the second half of 2020, economic growth has already started to recover.

Benefits of buying in Germany

Compared to other European capital cities, in Germany you get more house for your money. Prices are more competitive than in London, Greece or Madrid. However, property investors can be safe in the knowledge that as the demand is higher than the supply, house prices will continue to rise, ensuring secure property investments.

Lifestyle opportunities in Germany

Germany is a very safe country offering various lifestyle opportunities. Whether in one of the bustling ‘Big 7’ cities, in a historical old town with romantic half-timbered houses, on the coast in the north, on an island such as the beautiful island of Sylt, in the mountains, on a river, in the Alps with the wealth of winter sports, or at one of the Bavarian lakes – you can find the perfect place to live to suit your dream lifestyle.

If you are a keen city dweller, Hamburg is the banking metropolis with the country’s biggest harbour, spectacular houses and amazing castles neighbouring a large forest. Munich is the Bevarian metropolis with a large boulevard and easy access to the Alps and lakes close to Austria, or South Tyrol in Northern Italy. The city of Munich is set in a very good location and offers a safe investment that is less expensive than London and will always increase in price.

Not only does the landscape support all ways of life, society in Germany is very well organised and regulated, which is appealing to expats. The German health system is also famously known for being one of the best in the world.

House prices in Germany

There is a high demand for residential property and a low supply in the market, which has led to an increase in the price of properties. Prices of properties vary greatly throughout Germany, with housing prices generally being lower in the countryside. Properties in Germany tend to be very well built using quality materials while adhering to strict building codes. German houses are also required to meet certain legal requirements regarding windows, roofing, heating and so on.

So property investors can be safe in the knowledge that as the demand is higher than the supply, house prices will continue to rise, ensuring secure property investments. With this in mind it’s sensible to get a structural survey taken of the property, which will highlight any issues.

How to find a German property

Unlike in other European countries, in Germany it’s uncommon for properties to have “For Sale” signs in their window or garden to advertise the property is for sale. Properties tend to be advertised in newspapers or on estate agency websites.

Germans tend to buy a property with the intention of living in it for an extended period, or for life. This makes turnover low so it’s important to give yourself an extended period of time to find the right property for you. Avoid rushing into making a decision, and take time to assess the property!

How estate agency works in Germany

Estate agency in Germany is slightly different to estate agency in the UK.

• 5% buyer commission

• 6% seller commission

• Split commission for buyer and seller 3% / 3%

Previously buyers have had to pay for all or most of the estate agents fees, however 2020 saw this financial responsibility lie with both the buyer and seller.

If you are looking to buy in Germany, speak to a local agent about the commission they charge as it varies across Germany.

Tax implications

Depending on the federal state, the real estate transfer tax varies between 3.5% and 7%. It is advised to speak to an agent in the local area you are looking to buy in to understand the costs of purchasing a property.

Furthermore, there is an annual property tax which is raised by the local community. This annual tax depends on the value of your house and the area the house is in.

For all income from a property, e.g. rental income, tax must be paid in Germany. The costs of obtaining this income can be deducted from the income beforehand and the tax is to be paid on the balance (this explanation has been significantly simplified as Germany has one of the most complicated tax systems in the world). Estate agents in Germany are always able to provide buyers and sellers with all costs of property purchasing before committing to a contract.

The buying process in Germany

Although you may spend a significant amount of time house hunting, the purchase process tends to be pretty quick and simple, with it sometimes taking just over a month for the deal to complete. Once you’ve found a property you want to buy it’s time to put down a deposit and carry out the legal process. In Germany it is mandatory to use a notary, giving all parties involved the greatest possible level of security, as the notary acts neutrally between seller and buyer. A property sale must be carried out in the presence of a notary on all occasions.

The notary will draft the contract for review by the seller and buyer. It is the notary’s responsibility to ensure both parties fully understand the contents of the contract. In the event of dealing with an international buyer or seller, the notary will need to arrange a professional translator, if necessary. Once the contract has been signed by all parties it becomes legally binding.

The notary will then handle further steps with the local court, which once approved (taking usually around six weeks), the notary will set the purchase price due to be paid. The buyer pays directly to the seller and receives the keys for the property. The seller sends evidence to the notary that the purchase price has been received and only then does the notary arrange the transfer in the land register to the new owner.

Buying a house in Germany: Checklist

If you’re considering buying a property in Germany, these are the stages that you will need to go through.

1. Investigate mortgages and get an offer in principle

2. Find a suitable property

3. Make an offer

4. The notary (notar) will draw up the sale contract

5. Finalize the mortgage

6. Sign the contract

7. Notary registers the sale

8. Four weeks later, you must pay the property sale tax

What about buyers outside of Germany?

Foreign or international buyers and sellers buying a property in Germany, who are unable to be present or do not wish to travel, will be represented at the appointment (usually by Fine & Country Germany), enabling them to approve the contract from their home country at a notary or the German embassy. Financing is available for non German citizens, but typically won’t cover more than 60% of the purchase price. Fine & Country Germany have years of experience working with international customers, and are able to speak seven different languages, including German, English, Portuguese, Spanish, French, Italian and Polish.

If you are interested in investing in a rental property in Germany with no intention of living there, this is possible for international buyers with no additional taxes or registrations. All homeowners renting out a property will only have to pay the usual income tax in Germany. If you speak to an agent, they will be more than happy to talk you through the process.

Buying Property in Germany: FAQs

Can a foreigner buy a house in Germany?

Yes! There are no restrictions that prevent foreigners from buying a house in Germany.

Is it worth buying property in Germany?

Despite high prices, that are more competitive than in London, Greece or Madrid, buying a property in Germany is still worthwhile. Property investors can be safe in the knowledge that as the demand is higher than the supply, house prices will continue to rise, ensuring secure property investments.

Are there property taxes in Germany?

Yes, you will need to pay property tax within a month of your purchase being finalised. Property tax varies from state to state and is calculated as a percentage of the sale price.

Does buying a house in Germany qualify you for a residency visa?

No, buying a property does not automatically qualify you for a residency visa.

Contact us

If you have more questions regarding a property investment or plans to relocate to Germany, contact Fine & Country Germany today to start your journey.

If you missed our previous webinars for moving to Portugal or France, get caught up on all of the details and watch them below.

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