Buying Property in Germany
Germany is a popular destination for expats from all around the world due to its robust economy, high quality of life, and rich, diverse culture. Moreover, there’s a large expat community in the country. Bearing many job opportunities and offering both a vivid urban life and tranquility, Germany has something to offer to everybody. Hence, it’s a great destination to relocate to for foreigners who want to live and work abroad.
If you’re seeking to find a new home in Germany, contact us to learn all about purchasing a property in Germany as a foreigner.
Can Foreigners Buy Property in Germany?
Are you a non-German citizen that has been dreaming of living in a flat in the middle of vivacious Berlin? Or a cozy, refreshing farmhouse in the Bavarian? Well, the good news is that you can!
Buying a house in Germany is a good idea for so many reasons. Besides the fact that Germany is a great place to live for a foreigner, buying property there is also an excellent investment.
Everyone, regardless of their nationality, can buy a house in Germany. However, if you have a Blue Card or temporary residency and not a permanent one, your chances of getting a solid mortgage may be lower.
Pros and Cons of Buying a House in Germany
Although many residents in Germany opt for long-term renting houses instead of purchasing property, buying a house in Germany is quite advantageous. Especially if you’re planning to live in Germany for a long time, opting for a property purchase may result in a wise long-term investment, in addition to providing you with a set of conveniences.
Find below a list of the pros and cons of buying a house in Germany that’ll ease your decision-making process as to buying or renting in the country.
Pros of Buying a House in Germany
1. Great Investment
Purchasing real estate abroad in itself is a solid type of investment most of the time. In the case of Germany, on the other hand, it’s excellent. Although purchasing a property is pricey at first, paying a mortgage is about the same burden as paying rent. Moreover, if you’re buying the property not for self-living but for investment purposes, you can rent it out and gain a convenient monthly income effortlessly because the real estate scene is vigorous in Germany.
If you’re buying the property for self-living purposes, on the other hand, you can sell it in the future and make a profit. If you decide to sell it after a 10-year ownership, you’re not required to pay the capital gain tax.
The only downside of investing in real estate in Germany is that you can’t cash the investment out very quickly. It’s a long-term investment.
2. More Stable Than Renting
When you own the house you live in, you don’t have to worry about an unexpected rent increase or having to move upon a request by the landlord. If a landlord tells you that you should move out because they’ll live in the property, you have no choice but to find yourself another home, the rent for which will probably exceed the amount of the previous one.
Another perk of having your own house is that your monthly expenses will be more stable without a potentially rising rent.
3. Being in Control of Your Own Living Space
Living in your own house means that you’re in charge of everything. You can make renovations and structural changes, have pets in the house, or immediately intervene when there’s a problem regarding the structure or fixtures of the house. You can also furnish, paint, and decorate the house to your liking, creating your own space without worrying about the reaction of the landlord.
4. Relatively Low-Interest Rate
European Central Bank interest rates have been quite low for the past few years. Although it’s finding itself at the moment, the process is rather slow. Hence, it’s a good time to invest in a property in Germany rather than keeping your money in a bank where you can’t gain a decent profit.
Cons of Buying a House in Germany
1. Maintenance Expenses
Unlike when you’re renting, you’re responsible for all the maintenance costs, house management fees, and the like when you own a property.
2. High Initial Capital
Even if you’ll get a mortgage to buy a house, you still need at least 20 percent of the house price upfront, which is still a large amount to pay at once. However, it’ll help you get a better mortgage deal.
Average House Prices in Germany
House prices in Germany vary depending on the location. In the past few years, the figures increased dramatically due to immense demand for real estate and a lack of properties. Find below some average prices per square meter according to the cities:
- Munich: €8,877
- Hamburg: €5,475
- Berlin: €4,856
- Stuttgart: €4,873
- Dusseldorf: €5,192
- Frankfurt am Main: €5,605
Cost of Buying a Property in Germany
It’s not only the price for the property that you need to pay in order to buy a house in Germany. There are a few additional expenses, the total of which may correspond to 10% of the price of the property.
In Germany, the estate agent fees are divided into two between the seller and the buyer. The amount of these fees varies depending on a few factors: the price of the property, the state, and the terms of the agent’s contract. The agent fee can go up to a total of 7.14 percent including VAT, meaning that each party pays the additional amount that equals 3.57 percent of the property price to the estate.
Property Transfer Tax
The rate of the property transfer tax may vary between 3.5 percent and 6.5 percent of the price of the property you’re buying, depending on which state it’s in.
The property transfer tax must be paid within four weeks following the completion of your purchase. After the payment of this tax, your property ownership will be registered in the Grundbuch, the German land registry.
Below are some property transfer tax rates according to certain cities:
- Thüringen: 6.5%
- Munich: 3.5%
- Berlin: 6%
- Saarland: 6.5%
Notary and Land Registration
The notary’s part in the home-buying process in Germany is a crucial one that includes the registering of the property with Grundbuch. The fees to get these services may differ between 1.5% and 2% according to the price of the property.
Choosing Property To Buy in Germany
For your property search to be briefer and more effortless, it’s best to decide on some aspects of the property you seek to find prior to the actual search. Here are a few things to consider:
Type of Housing: Deciding beforehand on whether you want an old or a new property, or a house or a flat will come in handy when you start your search because you’ll know what to look for. You may also want to consider if you’d prefer buying land and building your own house from scratch.
Neighborhood: Upon deciding on which city you want to live in, depending on your needs and priorities such as proximity to schools, hospitals, amenities, or public transportation, you can choose a neighborhood and narrow down your search accordingly.
Your Budget: A thorough budget planning before initiating the property search by also considering extra expenses helps smooth out the process of property search.
Investment Return: If you’re buying German property as an investment, doing thorough research about how you can profit from such investment and choosing the location accordingly will be a wise move.
Hiring a Surveyor: Hiring a surveyor to see if there are any problems with the house before making the purchase is strongly recommended in Germany. This way, you can choose your property by being aware of all its issues and the costs to fix them.
Finding a German Property To Buy
You can’t really go for physical property hunting in Germany. The houses for sale are typically listed on websites or in newspapers. Getting in touch with real estate agents is another option for finding houses for sale. Here are some of the German real estate websites you can check as you look for a property to buy:
It’s possible to find private listings for which you’re not required to pay a commission to an estate agent on these websites.
Seven Steps To Buying a Property in Germany
There are a few steps you need to follow in order to buy property in Germany. These steps are as follows:
1. Prepare Ahead: Research the neighborhoods to specify where you want to live and plan your budget.
2. Look for Properties: Check the real estate websites—as many of them as possible—frequently for a long while because the housing market is very competitive in Germany. There are many websites in Germany that list the ads for properties on sale. You can also hire a real estate agent to help you with your search for a property.
3. Get a Pre-Approved Mortgage: This will carry you to the top among the buyer candidates, showing you have adequate financial means for the purchase.
4. View the Properties: Go to the viewings during daylight and check every inch of the property very carefully, taking pictures and paying attention to technical appliances, basic structure, etc. You can get a property survey done by professionals to detect any possible problems that the apartment or the building may have.
5. Make an Offer for the Property: Make an offer depending on the location, value, and state of the property. If the seller accepts the offer, you’re required to pay a reservation fee that corresponds to 0.5% – 1% of the property price. If you renounce from buying the property, however, the seller may keep the reservation fee.
6. Finalize the Mortgage and Your Finances: To finalize the mortgage process, you’re required to deliver some documents proving your income and identification, and showing the details of the relevant property. As you deal with your finances, make sure you spare some money aside for extra expenses.
7. Make the Purchase: Make a pre-contract in case the need arises. If not, make an appointment at the notary to sign the property purchase contract and get your property registered.
Mortgage for Foreigners in Germany
It’s possible for foreigners to get a mortgage in Germany. The only challenge is that if you’re not a resident, the amount of the deposit you’re required to will ascend. German banks such as Postbank, Commerzbank, Deutsche Bank, and Hypovereinsbank offer mortgages.
Five Factors That Can Have an Impact on Your Mortgage Case
Various factors can affect the result of your mortgage application when trying to get a loan from a bank in Germany. Find some of these factors below:
1. Residency Status
Having a permanent or unlimited residency permit increases your chances of getting a loan from a German bank. If you hold a Blue card, on the other hand, you have to make a down payment of at least 25% to become eligible for a loan.
2. The Amount and Currency of Earnings
The higher your income is, the better your chances of getting approval for your mortgage application are. You’re even required to get a life insurance policy in some cases, for your family to be able to pay your debt in case of your death.
You’re also required to earn Euros to be eligible for a mortgage. There are exceptions but most banks don’t give loans to those who earn in another currency.
3. Employment Status
Most banks in Germany give a mortgage to only those who have an unlimited employment contract. If you have a limited one or are on probation period, you’ll have to wait until you pass to apply for a mortgage.
Banks perceive you as riskier if you’re close to retirement age and may demand higher down payment rates to take such risk.
5. Assets and Debts
Having more assets and fewer or no debts makes you more qualified for a loan. The assets can be used to secure the loan given by the bank, so they make your case less risky. Having debts, on the other hand, is not favored by German banks while examining your mortgage application.
The Notary’s Role in the House-Buying Process in Germany
As mentioned earlier in this article, the services provided by the notary have immense importance in the house-buying process. The role of the notary as you buy a property includes the following:
- Providing legal consultancy to both the seller and the buyer
- Registering the ownership in the land registry
- Regulating the past registry
- Preparing a pre-contract
- Notarization of the contract following its signing
- Serving as an escrow agent between the two parties
- Notarization of the relevant mortgage
Challenges to Buying Property in Germany
Even if you decide to buy a property instead of renting a house in Germany, the process of property search and purchase can be challenging. Since there’s a vigorous real estate scene in Germany, you have to be extremely quick not to miss out on a property you’re interested in.
Checking out the listings very frequently and acting fast or investing in a house that’s being newly built are options to avoid such inconveniences.
Five Tips to Keep in Mind While Buying Property in Germany
- Make sure you’ve conducted thorough research before deciding on the neighborhood you’ll buy a house.
- Learn about mortgages beforehand. Check the offers of different banks to understand which one’s the best fit for you. Try to get pre-approval to forge ahead among potential buyers.
- Do comprehensive research including property market, prices, and types. Learn the relevant fees, regulations, and rules if you’re planning to do a renovation in the house you’re buying.
- See your options regarding surveyors and notaries if you’re not sure about the ones your estate agent recommends
- Go to view the property you’re interested in more than once during the different hours of the day to understand the characteristics of the property better. Going with a friend will provide a second opinion that’ll help you decide or not miss any problems the house may have.
Selling a House in Germany
If you decide to sell your property in Germany in the future, there are a few steps you’re required to follow. The first step is to hire a real estate agent, which is not mandatory, but strongly recommended. Otherwise, the process of selling your house may be overwhelming. Plus, working with a professional reduces the risks of potential inconveniences.
Here’s what you should do next:
- Preparing the house for sale
- Assessing the value of the property with the real estate agent
- Collecting the required documents including the land registry extract, floor plan, building permit, energy certificate, and more
- Paying the agent fees
- Paying the mortgage termination fees (if you’re still repaying)
Buying Property in Germany: Conclusion
There are a few challenges to buying property in Germany, like the possibility of paying a big deposit for the mortgage or getting lost in the real estate competition for a moment. However, if you do thorough research, get into it well-prepared, and follow the required steps, you’ll be living in your new home in Germany in no time. Go ahead and start planning your budget, then! Good luck!
Get in Touch with Real Estate Experts in Germany
At Get Properties, we provide our clients with assistance to ensure that they purchase their dream home abroad.
Contact us to speak to our real estate advisors who can guide you through your Germany real estate investment journey.