A Guide To Buying Property In Germany As An Expat
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me ([email protected]) or use WhatsApp (+44-7393-450-837).
Introduction
In Germany, buying property in Germany as an expat may be a wise investment, particularly if you want to stay there for an extended period of time.
Although just over 52% of Germans own their homes, the stability of the real estate market makes it a desirable investment option despite the country’s low house ownership rates. There are, however, a few crucial factors to take into account before you even begin shopping for a home.
The Property Market in Germany
German housing prices have significantly risen since the financial crisis, and at this point several analysts have raised the prospect of a bubble forming in key cities. For instance, according to the real estate consulting firm Knight Frank, Berlin was the world’s fastest-moving city market in 2017, with prices rising by a fifth (20.5%).
How enduring these increases are yet to be seen. According to data from 2018 provided by the Bundesbank, homes in towns and cities may be 15-20 percent overvalued.
This doesn’t always mean that you shouldn’t buy a house because certain areas are still within your price range.
According to data from the German consumer group Stiftung Warentest, purchasers in Magdeburg and Cottbus might purchase a 130-square-meter family house for €200,000, but for the same amount they would only be able to afford a dorm in Munich and a tiny two-room flat in Cologne or Dusseldorf.
Can Expats Buy Property in Germany?
In Germany, there are no restrictions on foreigners who wish to own a home. You can purchase a home in Germany as a foreigner, either for personal use or as an investment.
Therefore, purchasing your own home makes sense if you want to stay in Germany for a time. You may always rent out your home if you end up leaving Germany. It implies that you will continue to reap the rewards of your real estate investment even after leaving Germany.
You don’t even have to be in Germany to purchase a home as a foreigner. Your capacity to secure a mortgage is the sole obstacle.
Why Consider Buying Property in Germany?
For many people, owning property is a dream. One of the finest investments, in the opinion of many, is buying property in Germany. Since they believe that renting a house involves aiding the owner in paying his mortgage, the majority of people actually dislike renting. Why not utilize the funds to settle our own mortgages in their place?
The mindset in Germany is a little different. Renting is still a popular option. Many locals rent their homes despite the fact that they can afford to buy property in Germany. Many of them are simply content with renting, and they pay such cheap rent since they have lived in the same house for a long period.
Furthermore, many Germans dislike taking chances. Taking out a large loan to purchase a property in Germany is regarded as dangerous for them.
In Germany, the homeownership rate is really a little under 50%. One of the lowest among the nations of Europe. However, because of the low-interest rate, the ratio is increasing. Additionally, the real estate sector is regarded as a solid investment opportunity for foreign investors.
House Prices in Germany
The data from the Global Property Guide in 2017 shown below provides an idea of the cost of a home per square meter in each city.
- Munich: €5,839 (apartment), €4,233 (family home)
- Hamburg: €3,669 (apartment), €2,529 (family home)
- Berlin: €3,593 (apartment), €2,321 (family home)
- Frankfurt: €3,167 (apartment), €2,500 (family home)
- Cologne: €2,671 (apartment), €2,240 (family home)
- Hanover: €2,257 (apartment), €2,007 (family home)
A supply and demand mismatch is one of the causes of this price increase. While 280,000 new homes are created in Germany each year, some experts argue that this number is insufficient.
For both domestic and foreign investors, German real estate is a steady, trustworthy investment. However, yields might be poor in some places.
A few of the tax incentives that were previously accessible to investors have also been eliminated. For many expats, buying property in Germany is only appealing for longer stays due to the capital gains tax (abgeltungsteuer) of 25% (plus a solidarity penalty) that is applicable to any property owned for less than 10 years.
Additional transaction expenses on top of the purchase price might vary from 7 to 12 percent for buyers and 2-4 percent for sellers.
6-Step Process of Buying Property in Germany as an Expat
1. Assess your financial situation
The first step in considering owning a home in Germany is to assess your financial situation. You should learn about mortgages and how much you may theoretically borrow. Before you even begin looking, this provides you with an idea of the kind of houses you can afford.
The most straightforward approach to buying property in Germany, whether it be for personal use or as an investment, is to utilise this free online mortgage calculator. Simply input the home’s price, your down payment, and a few other essential details. After that, you may speak with a financial advisor and quickly view the various mortgage possibilities.
2. Look for the right property
When you are aware of your financial capabilities, you may begin looking for a property to buy. You have the option of searching online or via an estate agent.
A real estate agent (Immobilienmakler) or privately may sell a property. In either scenario, it is often the buyer’s responsibility to locate a property and then get in touch with the owner or their agent.
This also implies that, although it’s not always the case, estate brokers are often compensated by the seller. It’s crucial to confirm who is paying the agents because their fees are normally between 3 and 7 percent of the transaction price. They have a national association called the IVD where you may locate an estate agent.
You may find advertisements in newspapers and look for properties on estate agency websites or online property portals, much as in most other European nations. Properties that are for sale could have a sign in the window or a notice board in the yard announcing their status. However, you shouldn’t always expect on seeing every property for sale because this is quite uncommon in Germany.
Online real estate platforms you may visit:
3. Agree on a price and terms with the seller
Once you’ve found your dream home, you should negotiate the price and terms with the seller. Following that, the notary can draft a selling contract.
4. Complete your mortgage transaction
You now have complete knowledge about the property’s pricing. You can return to the banks and request formal proposals. Examine your options. Choose the best option and complete your mortgage.
5. Sign the contract
You may now sign the contract with the seller if you have obtained your mortgage. The contract must be signed in front of a notary. The notary will record the transaction in the land registry after the contract is signed.
6. Pay the real estate sales tax
The property has now been formally transferred to your possession. Four weeks later, you must pay the property sales tax.
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Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
