Guide to buying real estate in Germany as an expat
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In Germany, buying real estate in Germany as an expat can be a smart investment, especially if you want to stay there for a long 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 home ownership rate. However, there are a few important factors to consider before you even start shopping for a home.
Real estate market in Germany
German housing prices have risen significantly since the financial crisis, at which point several analysts raised the prospect of a bubble forming in key cities. For example, according to the consulting firm Knight Frank, in 2017 Berlin was the most dynamic urban market in the world. prices are rising by a fifth (20.5%).
How durable these increases are remains to be seen. According to data from the Bundesbank for 2018, houses in cities may be overpriced by 15-20 percent.
This does not always mean that you should not buy a home because some areas are still within your property limits price range.
According to the German consumer group Stiftung Warentest, buyers in Magdeburg and Cottbus could buy a 130 square meter family home for €200,000, but for the same amount they could only afford a hostel in Munich and a small two-bedroom apartment in Cologne or Dusseldorf.
Can expats buy real estate in Germany?
There are no restrictions for foreigners who want to own a home in Germany. You can buy a house in Germany as a foreignereither for personal use or as an investment.
Therefore, buying your own home makes sense if you want to stay in Germany for a while. You can always rent out your home when you leave Germany. This means you will continue to reap the rewards investment in real estate even after leaving Germany.
You don’t even have to be in Germany to buy a house as a foreigner. Your ability to get a mortgage is the only hurdle.
Why buy real estate in Germany?
For many people, owning property is a dream. One of the best investments, according to many, is buying real estate in Germany. Because they believe that renting a home involves helping the owner pay the mortgage, most people actually don’t like renting. Why not use the funds to settle your own mortgage instead?
The mentality 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 a property in Germany. Many of them are satisfied with just renting, and they pay such a cheap rent because they live in the same house for a long time.
In addition, many Germans do not like to take risks. Take a big loan to buy real estate in Germany it is considered dangerous for them.
In Germany, the home ownership rate is actually just under 50%. One of the lowest among the nations of Europe. However, due to the low interest rate, the ratio is increasing. In addition, the real estate sector is seen as a good investment opportunity for foreign investors.
Housing prices in Germany
The 2017 Global Property Guide data below gives an idea of the house price per square meter in each city.
- Munich: €5839 (apartment), €4233 (family house)
- Hamburg: €3669 (apartment), €2529 (family house)
- Berlin: €3593 (apartment), €2321 (family house)
- Frankfurt: €3167 (apartment), €2500 (family house)
- Cologne: €2671 (apartment), €2240 (family house)
- Hannover: €2257 (apartment), €2007 (family house)
The mismatch between supply and demand is one of the reasons for rising prices. Although 280,000 new homes are built in Germany each year, some experts argue that this number is not enough.
Both for domestic and foreign investors, German real estate it is a sustainable, reliable investment. However, yields may be low in some locations.
Some tax benefits previously available to investors have also been withdrawn. For many expatsbuying real estate in Germany is only attractive for long-term stays because of the capital gains tax (abgeltungsteuer) of 25% (plus joint penalty) that applies to any property owned for less than 10 years.
Additional transaction costs on top of the purchase price can range from 7 to 12 percent for buyers and 2 to 4 percent for sellers.
The 6-step process of buying real estate in Germany as an expat
1. Assess your financial situation
The first step in considering buying a home in Germany is to assess your financial situation. You should learn about mortgage loans and how much you can theoretically borrow. Before you even start looking, this will give you an idea of what homes you can afford.
The easiest approach to buying real estate in Germany, whether for personal use or as an investment, is to use this free online mortgage calculator. Just enter the price of the house, your down payment and a few other important details. After that you can talk to a financial advisor and quickly view different mortgage options.
2. Search for the right property
When you are aware of your financial options, you can start looking property to buy. You have the option of searching online or through a real estate agent.
A real estate agent (Immobilienmakler) or privately can sell real estate. In any case, it is often the buyer’s responsibility to locate the property and then contact the owner or their agent.
This also means that, although this is not always the case, real estate brokers are often compensated by the seller. It is very important to confirm who pays the agents because their fees are usually between 3 and 7 percent of the transaction price. They have a national association called IVD where you can find an estate agent.
You can find ads in newspapers and search for properties in real estate agencies websites or online real estate portals, as in most other European countries. Properties for sale may have a sign in the window or a bulletin board in the yard announcing their status. However, you should not always count on the sale of every property, because this is quite rare in Germany.
Internet real estate platforms you can visit:
3. Negotiate the price and terms with the seller
Once you have found your dream home, you should discuss the price and terms with the seller. After that, the notary can draw up a sales contract.
4. Complete the mortgage transaction
Now you have complete information about real estate prices. You can go back to the banks and ask for official offers. Explore your options. Choose the best option and get a mortgage.
5. Sign the contract
Now you can sign a contract with the seller if you have received a mortgage loan. The contract must be signed by a notary public. After signing the contract, the notary will record the transaction in the land register.
6. Pay real estate sales tax
The property is now officially in your possession. In four weeks you should pay real estate sales tax.
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