Dreaming of settling in a Bavarian farmhouse or a renovated warehouse studio in Berlin? Our guide to buying a house in Germany explains how to make those dreams come true, from the legal requirements to the fees, and where to search for your new German home.
Since the financial crash, house prices in Germany have increased considerably, and have now reached the point that some commentators have warned of the possibility of a bubble emerging in major cities. For example, the property consultancy Knight Frank claimed that prices in Berlin increased by a fifth (20.5%) in 2017, making it the fastest moving city market in the world.
It remains to be seen how sustainable these increases are. Data from 2018 by the Bundesbank suggested that properties in towns and cities could be overpriced by as much as 15-20%.
This doesn’t mean that you should be put off from purchasing a home, as some places do remain affordable. Data published by the German consumer organization Stiftung Warentest in 2017 showed that buyers in Magdeburg and Cottbus could buy a 130 square meter family home for €200,000, but that for the same money they’d get a small two-room apartment in Cologne or Dusseldorf, and only a dorm in Munich.
The below figures from the Global Property Guide give an indication of house prices per square meter in each city. This is based on data from 2017.
One of the factors behind this growth in prices is an imbalance between supply and demand. Some experts claim that while 280,000 new homes are built in Germany each year, this figure isn’t high enough.
German property is a stable, reliable investment for both local and overseas investors. Yields can be low in some areas, however.
In addition, some of the tax breaks available to investors have now been removed. In addition, a capital gains tax (abgeltungsteuer) of 25% (plus a solidarity charge) applies to any property owned for less than 10 years, meaning that for many expats buying property in Germany is only attractive for longer stays. Transaction costs can also range from 7–12% for buyers (around 2–4% for sellers) on top of the purchase price.
Renting in Germany is very popular, with a little over half of Germans living in rented accommodation. This is most common in the major cities, with Berlin having a remarkably low home-ownership rate of just 15%.
According to data from the Bundesbank, rent prices increased by 7.2% in Germany during 2017. Data from Global Property Guide shows the average rents and yields on a 120 square meter apartment in three major cities:
Properties may sell either privately or through an estate agent (Immobilienmakler). In either case, the onus is usually on the buyer to find a property and then approach the owner or their agent.
This also means that estate agents are usually paid by the seller, but this is not always the case. As agents’ fees are typically 3–7% of the purchase price, it’s important to check who is paying them. You can find an estate agent through their national organization, the IVD.
As in most European countries, you can find adverts in newspapers or search for homes on estate agency websites or online property portals. Properties for sale may have a sign in the window or notice board in the garden advertising their status, but this is relatively rare in Germany so don’t count on spotting every house for sale, even on a street you walk down every day.
Online property portals
Contracts are in German and signed in the presence of a notary. You should ensure you fully understand the contract before signing, and bring an interpreter with you if necessary. You have the right to have a translator with you, but you will have to supply (and pay) them yourself. In some areas, you may be able to find a notary who is bilingual.
As you will be arranging financing for the property at the same time as you are arranging the sale, it’s important to include an exit clause in the sale agreement that gives you a way out if you can’t arrange a mortgage.
When buying a property in Germany, you can expect to pay most of the costs. Typically, the seller will pay the estate agent, but if you have used a buyer’s agent or the agent splits their fee, you may still have to pay something.
The total cost to the buyer of purchasing a property is usually around 10% of the purchase price. This covers:
Property transfer tax/real estate transfer tax:
When you buy a home in Germany, you’ll need to pay transfer tax (Grunderwebsteur). This is levied from 3.5% of the purchase price, but is higher in some areas. Currently, the prices are the following for each region: