may not be on the top of your list for holidays and retreats in the sun
however it provides an attractive opportunity for investment, not to
mention a vast and diverse country to explore.
Located in central Europe, Germany is the EU’s largest economy and most
populous country. Divided into 16 states, each with its own distinct
cultures, and an impressive landscape that varies from wind-swept hills
and coastline in the north, through picturesque valleys down to the
Black Forest and the Alps in the south.
While the beautiful landscape and variety make it a nice place to live, a
high percentage of Germans renting rather than buying makes it an
interesting investment option – latest available data shows a home
ownership rate of only 42 per cent, while in Hamburg for example it is
just 20 per cent, meaning there is a big rentals market.
The property market did not suffer the recent financial crisis and
prices do not tend to change fast creating a stable environment in which
to invest. Moreover, house prices are set to steadily rise 4.2 per cent
by 2015 across the country, 6 per cent for residential housing in the
five major cities.
Dresden is regularly ranked as one of the best cities in the country
and is the fastest growing in eastern Germany. Unemployment is reaching
new lows and has seen its GDP per capita raised to the level of many
western German cities. The city suffered heavy bombing in World War Two,
destroying the majority of the city centre, but since then it has been
regenerated, making it one of the greenest cities in Europe (63 per cent
is covered by green spaces) and reaching the cultural and economic
importance it has today. Low prices and signs of significant growth
present an attractive investment opportunity. €36,000 will get you a top
floor one-bed flat on the outskirts of the city and for €159,000 you
can have a two-bedroom apartment in a good location not far from the
centre.Germany’s second biggest city, Hamburg, offers a lot for the expat. It
has the largest average living space (30m2) per person of any major
German city (more than most other global cities) and is rated highly for
livability. An attractive city with a wide range of architectural
styles and more bridges than Venice and Amsterdam combined, it also has a
big English community and is an important transport hub in northern
Germany. Expect to pay around €100,000 for a studio apartment not far
from the centre. For something a bit more tranquil, a two-bedroom house
on a large plot and a heated pool can be had for €150,000 between
Hamburg and Bremen, an hour from Hamburg Airport.
and the capital city, Berlin, each provide a contrasting experience.
Munich consistently ranks high on livability and quality of life scales.
Located in the south close to the border with Austria, and just north
of the Alps with beautiful views, it has been voted the most successful
city in the country, although it is one of the most expensive. On the
other hand, Berlin, in the northeast, offers a cheaper investment
option. Most people in the city rent so there is no shortage of tenants
and the low prices of property coupled with the re-growth of the city
indicates potential opportunities. Empty flats come at a premium due to
tenant rights and it is essential to research the difference between
the various districts.
Most properties are expensive in Munich and demand is high. Small
one-bedroom apartments are available from €250,000 and large ones from
€430,000, depending on the area. Meanwhile in Berlin a one-bed apartment
can be had from a little as €50,000, and two bedrooms from €120,000.
Apart from the notary (Notar), the buying process is not so different
from the UK. The Notar will act as an independent figure, will check
the title deeds and oversee the signing of the contract between the
buyer and the seller. They will also list the transfer of ownership with
the land registry. The purchase price is often paid into the account of
the Notar, only being transferred to the seller when the registry is
complete. The buyer can choose his or her own Notar and it is a good
idea to look for an English speaking one or take a translator with you
to the meetings.
Once the right property has been found an offer should be made. If it is
accepted then the contracts must be drawn up and translated. The final
contract should include all the property details, the price, date of
completion, conditions of payment and withdrawal should any party decide
to do so. The handover date will be present in the contract, which may
enable claims to be made if the deadline isn’t made. It is strongly
advised to have an interpreter attend at least the important stages in
the case of a less than fluent command of the language and a valid
passport will be required as identification.
The agent can be expected to charge a commission of between 3 and 7
per cent of the total purchase price. This will be agreed upon and
depending on the agreement can be paid by the buyer, the seller or both.
As a general guide, the costs of the process can be estimated at around
10 per cent of the purchase price. Breaking it down, 3.5 per cent for
the property transfer, 1.5 per cent for the notary and 1 per cent for
the land title registry. Other small administrative and interpreter fees
may be required.
A deposit of about 30 per cent will likely be needed to obtain a
mortgage which should cover 60 to 70 per cent of the cost up to a 20
year period. Interest rates are the lowest in years at about 4 per cent.
The German property market is generally well regulated but there are a few things to look out for:
- With agents, beware of opting for a restrictive exclusivity agreement; or paying commissions to multiple agents.
- There is no law regarding commissions on sales, so try to agree the percentage and who will be paying at the start.
- Germany has a capital gains tax of 25 per cent on anything gained from
re-selling the property, exempt on property owned for over 10 years.
This may change in the future.
- Laws in Germany favour the tenant over the landlord, and if the
property is currently being rented, the tenant cannot be evicted by the
new owner before the lease has terminated.
- Germany is part of the European Union but you will need a residence permit to stay for more than three months.