Germany It is a well known fact
that the German economy was in difficulties for a long time after
reunification and, as a result, the property market suffered
considerably. For the foreign buyer, this means that a plentiful supply
of housing is available at affordable prices. Add the fact that
is a nation of renters (only 43 per cent of Germans own their own home),
and the investment potential of this European nation suddenly looks very
In fact, you only have to look at how much global investment companies
are spending in Germany to realise its full
potential. For example, in 2004 one well known Investment Group bought
80,000 properties for an impressive £2.3 billion.
The result of such spending means that house prices in
Germany are on
the rise once again, after dropping 6.8 per cent between 1994 and 2004,
albeit not at an unprecedented rate. For a long-term investment,
however, this bodes very well, as a steady economic recovery moves
steadily forward and appears to be a solid one.
Germany in the EU including links to German government sites and
Popular locations to buy: If you are planning on renting your
property out, the best bet is to consider a city home as many Germans
move to the city centres in pursuit of work.
The capital of Berlin offers great value for money and, home ownership
figures in the capital are as low as 11 per cent, so finding a tenant
should not be too difficult. Facilities and amenities in the city are
also good thanks to the 2006 football World Cup, which resulted in
plenty of inward investment into the capital.
Homes in Munich are the most expensive in the country, with prices
averaging around £6,500 per square metre.
Meanwhile, Frankfurt, the financial centre of
Germany, offers a large
choice, although at slightly higher prices. Finally, the cities of
Dusseldorf are all worth watching, especially as
the number of new builds in these areas have been decreasing year upon
year for the last seven years, and is now at an all time historical low.
As always, rural properties offer much better value for money, with
houses starting from around £53,000.
Legal issues: There are no restrictions for other EC
nationals buying in Germany, however if you wish to stay for longer than
three months you will need to apply for a residence permit. This can be
obtained from the local Foreign Nationals office at the local town hall
or area administration centre, and once obtained it is valid for five
The buying process: The purchase process in
similar to that in the UK, apart from the
presence of a notary. Once you have found a property that you like to
purchase, you can put in an offer. When a final sale price has been
agreed between buyer and seller, contracts will be drawn up by your
respective solicitors and, if you are not 100 per cent fluent in German,
they will be translated. All contract terms are variable, so it is
essential that you
employ an independent solicitor especially as there
is no cooling off period once the initial contract is in place.
The contract will include all property details such as the agreed price,
completion date, payment conditions and stipulations regarding either
party withdrawing from the purchase. At this point you must instruct a
notary, who will act as a neutral intermediary between buyer and seller
and check the title deeds.
In order to complete on the sale, both parties need to be present to
sign the final contract before the notary. You will need to produce a
valid passport at this time, and it is advisable to have a translator
present to ensure that you are aware of the entire transaction. Once the
contract has been signed the deal is complete, and the notary will list
the change of ownership with the land registry.
Interest rates in
are currently low, at around 4.5 per cent, which offsets the amount of
equity needed to acquire a mortgage. As a rule of thumb you will need a
30 per cent deposit in order to obtain a German mortgage, but some banks
will require as much as 40 per cent. As a result, many German nationals
have combined their debt in the form of a building society loan and a
bank mortgage. Fixed rate loans are the most common, with mortgages
available up to 30 years, providing that you will have repaid the loan
before you reach retirement age.
Despite such low interest rates and high deposits,
Germany currently has
the highest average mortgage repayments in the European Union. If you
are considering buying in Germany, it may be more economical to raise
finance in your own country by remortgaging an existing property since
your own counties lenders will not provide a mortgage against a German
property and you will avoid incurring currency charges and fluctuating
exchange rates. Whichever way you decide to finance your purchase,
ensure that you have it all in place before you submit an offer.
Fees and taxes:
When buying a German home
you will need to budget around six to seven per cent of the purchase
price in order to cover fees and taxes. This is broken down into
Transfer tax (Grundwerbesteuer) of 3.5 per cent
Notary fees of 1.5 per cent
Land tax of one per cent.
In addition, if you are not a German resident, you may be liable for
a 0.5 per cent wealth tax.
During your time as a
homeowner in Germany you will also be required to pay annual property
taxes, the rate of which will depend on where you buy, as it is set by
the local authority. As a rule of thumb however, the amount payable is
usually the basic rate (around 0.35 per cent of the property’s rentable
value) multiplied by the individual authorities stipulated percentage.
Capital gains tax will be payable at current interest rates when you
come to sell the property, unless you have owned it for over ten years.
The introduction of
capital gains tax of between 20 and 30 per cent on all properties
started from 2008.
arriving at effective capital gains tax rates, the authorities will make
the following assumptions:
The property is directly and jointly owned by husband and
They have owned it for 10 years
It is their only source of capital gains in the country
It has appreciated in value by 100% over the 10 years to
The property was worth US$250,000 or 250,000 at purchase
It is not their sole or principal residence.
a tax levied on consumer expenditure. The sale of property is
generally exempt from VAT.
supply of services related to real estate situated in
however, generally subject to VAT and accounted for in Germany. The
standard rate of VAT in Germany is currently 19%.
Whether you are
buying or selling you will be required to pay half of the estate agents
bill, which comes to about six per cent.
Visas, residency and work
As an EU member you are
entitled to work in Germany without a work permit. There are different
rules for other nationalities.
As an employee you will be
required to work a 36 to 40 hour week, but there is a minimum
entitlement of 25 days annual holiday, and it’s not uncommon for this
figure to come in at around 30 days. In addition, workers also receive
nine bank holidays per year.
On average salaries in East Germany are 25 per cent lower than in the
west, but as a whole wages in Germany are higher than elsewhere in
Europe. Benefits are also good, with many firms paying an additional
13th month’s salary at Christmas.
Both employers and employees pay around 20 per cent of their gross
monthly salary into the country’s social security scheme, which covers
healthcare, unemployment benefits, accident and sick pay and pensions.
New-build versus resale:
Many easterners have moved
to the West since reunification, therefore leaving a surplus of property
in the East to the tune of one million homes. Around a third of these
are now due for demolition, while the remainder will be renovated in
order to attract tenants. Despite this surplus, the Federal Bureau for
Building and Regional Planning has estimated that the country requires
300,000 new homes to be built per year from now on.
As a result, buying off plan could be a lucrative investment. Since many
German families rent for a long period of time, there is much demand for
quality accommodation – and new-build homes appeal to this market. Newly
renovated properties fit the same bill, and so a building that’s in need
of refurbishment could also pay dividends. In fact, many investors are
now buying whole apartment blocks comprising around eight units, with a
view to renovate and then let out in order to achieve a high yield.
At the end of the day, however, as long as your property is in good
condition, and in a good location, the age of the property is somewhat
Berlin is considered the
city with the lowest property prices in Europe, in fact, they are
currently around a tenth of those in London. Therefore experts believe
that prices in Germany can only go one way, and that’s up. Investing in
Germany however is seen as a long-term investment in regard to capital
growth, as this is pegged to the somewhat fragile economy.
If you are hoping to make solid rental returns, however, then it’s a
different story. Thanks to the German penchant for renting, yields in
the larger cities can reach eight to ten per cent. This is a good return
on a relatively low investment, and it’s unlikely that you will ever
have a vacant property for long, provided that you are offering good
quality and affordable accommodation.
Be aware however that, due to the lack of locals entering the property
market, it could take some time to sell your German home, a problem that
could cause financial difficulty if you needed to release equity in a
Health and education:
free, and is compulsory for children from the ages of six to 18. The
academic standard is very high, and as a result many expatriate parents
send their children to local schools. Having said that, there is a large
choice of international schools available, with the major cities of
Frankfurt, Munich, Hamburg,
Berlin and Dusseldorf all boasting one.
There is also a prep school in Bonn which is run by the British Embassy
– fees for all of these, however, vary so it’s important to do your
Medical treatment is of a high standard, with
Germany having the highest
ratio of hospital beds to population in the EU. Treatment costs for
workers are covered by social security insurance, but you will have to
pay for any dental work and prescription medicines. If you are not
covered by the German social security scheme it is essential that you
take out private health insurance – although your European Health
Insurance Card may entitle you to a refund.
Transport: Getting to
Germany by air is easy with a
range of low cost carriers such as EasyJet, KLM Ryanair and Jet2 all
flying there on a frequent basis. Internal flights are also available,
but the most popular form of transport once in the country is road, with
all of the major cities linked by the Autobahn. While there is no
official speed limit for these motorways, a maximum speed of 130
kilometres per hour is generally acceptable. In the cities themselves,
traffic congestion can be a problem, and speed limits are 50 kilometres
per hour. On all other roads, including dual carriageways, 100
kilometres per hour is the maximum speed.
You are entitled to drive in
Germany on an EC licence issued in another
EU country for an unlimited time, but there are some minor differences
in road laws. For example, drivers must carry warning triangles at all
times, and the maximum level of alcohol allowed in the system is 50 milograms per 100 millilitres of blood.
The public transport system is better in the West, but most cities offer
a comprehensive service. The train service is reasonably priced and
reliable, but connections in rural areas can leave something to be
Buying a property in
Germany suits two
types of purchaser, those who are moving to the country and those after
a long-term investment. Should the government decide to push this nation
of renters into a home ownership culture, then owners of German property
would be in an excellent situation to capitalise on the supply/demand
There is a risk however that the recently recovered economy could
collapse once again, leaving you somewhat high and dry. Tenants also
have strong government support, for example it is illegal to evict a
single mother even if she refuses to pay the rent, so you could be left
with an additional mortgage to pay should anything go wrong.
Vendors, a Quick sale of your property