German Property: Stable and Reliable Investment for Domestic and Overseas Investors
In the past years, German properties have proven themselves to be a stable and reliable investment for domestic and international investors. If you are interested in knowing why it is the case, then this article is for you. Continue reading below for more valuable information.
German Property Market
Ever since the recent world financial crash happened, the house prices in Germany have considerably increased. For example, in 2017, property prices in Berlin have increased by over 20%.
However, despite this, German property is still considered a stable and reliable investment for domestic and foreign investors. This is because domestic or foreign investors have a lot of incentives when investing in German properties.
Moreover, in terms of a whole, Germany offers more than just reasonable real estate prices. The country is also full of comprehensive infrastructure and highly educated employees. It also has economic and political stability and a low inflation rate.
Investing in German Property as a Foreigner
Unlike other counties, Germany does not have restrictions on foreigners buying real estate properties. You can get full ownership even if you are not a resident or even an EU national.
However, there are a few restrictions over the acquisition of agricultural properties, such as those located in urban improvement and relocation areas. The ownership of these types of properties are often subject to the discretion of public permit authorizing bodies. This is mostly due to governmental and national interests.
To give you a better idea of how much the cost of investing in Germany is, here are the prices of German real estate per square meter according to cities based on 2017 data:
- Hanover: €2,007 for family homes and €2,257 apartments
- Cologne: €2240 for family homes and €2,671 for apartments
- Frankfurt: €2,500 for family homes and €3,167 for apartments
- Berlin: €2, 32 for family homes and €3,593 for apartments
- Munich: €4,233 for family homes and €5,839 for apartments
If you notice, there’s a slight imbalance in the prices of property in different cities. The reason behind this is mostly because there is an imbalance in terms of the supply and demand for the property. In fact, according to experts, around 280,000 new homes are constructed yearly in Germany. However, with its growing population, that amount is not sufficient.
Property Acquisition in Germany
In Germany, there are 2 main ways of acquiring property; asset deal or share deal. Asset deal refers to the direct acquisition, while share deal is when a legal entity purchases a property, then the ownership is transferred. Regardless, to make any of these acquisition methods legal, they must have a notarial deed.
The deed must include all the necessary aspects involved in the acquisition. Any other agreement or side letter that amends it both in writing or oral form may result in the acquisition being null and void.
In addition, take note that all of the real estate properties in Germany are recorded under the Land Register. Therefore, the new owner must be registered in the necessary land register to gain ownership over a property fully.
Also, take note that if you are a foreigner investing in a real estate property in Germany, you must have evidence of Existenzbescheinigung and Vertretungsbescheinigung. These are the necessary certificates that will show that your legal representative is authorized to process things on your behalf when it comes to acquiring a property.
Incentives in Investing in German Property
One of the best things about investing in German property is the tax incentives that investors can enjoy. The country offers tax incentives for investors who are putting their money on residential properties for rent. In these cases, most of the input costs will be written down. This covers the cost for notary, management fees, estate agents, and interest on loans.
Aside from that, another incentive is given in the form of 2% depreciation per annum for 50 years for physical property purchases built from December 1924 onwards. Moreover, the profit of residential investment unit sales is tax-free, given that it is owned by the investor for a minimum of 10 years.
Tips When investing in German Properties
Suppose you are interested in investing in German real estate properties. In that case, the following tips can be helpful whether you are a domestic or foreign investor:
- Think About the Location
As mentioned, the cost of real estate properties significantly differs from one city to another. This is why before investing, research the area first. Aside from the prices, look at the public facilities available as well.
- Research on the Cost
The cost of acquiring properties in Germany typically include:
- Notary fee
- Grunderwerbsteur/ Property Purchase Tax
- Makler/ Estate Agent Fees
Other cost might be added, especially if you are a foreign investor living outside of Germany.
- Find the Best Deal
There’s a wide range of financing options available in Germany. If you are a domestic investor, you might want to consider taking advantage of these. 100% of mortgages are offered to investors who are residing in Germany, while 55% are offered to EURO-currency countries.
To be able to make the best-educated decision possible, you might also want to consider hiring an independent mortgage advisor. They can provide you with more in-depth information about the options suitable for you.
Indeed, Germany’s current real estate market is stable and reliable, making it an attractive place to invest in for both domestic and foreign investors. However, some areas in Germany have a growing population but are facing residential property expansion problems. Because of this, it is difficult to say whether this reliability and stability will continue in the future.
Regardless, if you are planning to invest in German properties, it is something that is still worth exploring. Just make sure to research the particular area that you are planning to invest in. Besides, if you are a foreigner, investing in Germany is less hassle since they are not so strict with foreign investors owning properties.