Buying property in Germany: Everything you need to know

Buying property in Germany: Everything you need to know

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. Property owners within and outside of Germany can reap the benefits of rising house prices and safe investments. But how can you access the property market in Germany if you are not a resident?

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 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.

 

Overview of the German 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%. 

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.

 

How estate agency works in Germany

In Germany, the commission is not regulated uniformly. There are three different existing models:

• 5% buyer commission

• 6% seller commission

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

At the end of 2020 there will be a change in law, which will only allow sharing commission or seller’s commission.

If you are looking to buy in Germany, speak to a local agent about the commission they charge as it varies across Germany. - can we link to Germany office contact?

 

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

The purchase process is relatively simple for the parties involved as the notary takes care of the process. Once the property has been chosen by the buyer, the notary writes up a notarised draft of the sale, which is presented to the seller to review before notarisation. 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.

What about buyers outside of Germany?

In some instances, parties are unable to be on site for notarisation, e.g. foreign buyers or sellers who do not wish to travel. These members are represented at the appointment (usually by Fine & Country Germany) and subsequently approve the contract in their home country at a notary or the German embassy. Fine & Country Germany have been working with international customers for many years and have a lot of experience in this area. The office at Fine & Country Germany 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.

 

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.

 

25th Sep 2020

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