Home sweet home: Guide to buying property in Germany as an expat
Buying property in Germany
If you’re an expat looking for a long-term home abroad, or simply looking to invest in a stable property market, you might be wondering: Can I buy an apartment in Germany as a foreigner? The short answer is, yes. One of the great incentives to buying property in Germany is that the real estate market is open to both foreign and domestic investors. While the home ownership rates in Germany are relatively low (51.5% in 2018), mostly due to favourable tenancy laws, the stability of the real estate market in Germany along with comparatively affordable property means that it remains an attractive investment. However, there are several things you should keep in mind as you start your search.
Taxes, counselling, and notary costs
Buying an apartment in Germany is not as simple as getting a loan and making an offer. Just as in most places in the world, there are always additional costs that you need to be aware of when calculating the total purchase price. Closing fees, notary fees, and transfer taxes can account for up to 11% of the price of the home—considerable costs, especially since most mortgages don’t cover these fees. Commission-free properties can save you this expense. You should be sure that before you look into buying an apartment in Germany, you have enough equity saved to be able to afford these extra costs. If you don’t speak German, or at least not well enough to feel comfortable understanding legal and financial matters, you may have to hire a German speaking intermediary. It is worthwhile to educate yourself beforehand by learning key German financing terms and understanding how the system works here before committing to buying property.
Can you take out a mortgage in Germany as a foreigner?
Now that you’ve found your dream apartment, and you’ve saved up enough to cover a down payment and the additional costs associated with buying an apartment in Germany, you’ll probably need a mortgage. In Germany, there are several different types of loans to choose from. If you’re not a German national, this might seem like a daunting process, but it is theoretically feasible for anyone to take out a loan in Germany. However, German banks are notoriously cautious lenders, and will carry out extensive background checks on anyone applying for a loan. They will be especially stingy to foreigners who have limited residency or an expiring visa, or even a limited job contract. While this can make it difficult to find a lender, it's not impossible. If you have substantial equity or provable cause for long-term residency in Germany, you may still be eligable for a mortgage from a German bank. As long as you’ve got all your paperwork in order, you shouldn’t have any problems being approved for a mortgage in Germany. That being said, if your German skills are not up to par, it might be beneficial for you to consult an English-speaking mortgage or financial advisor who can guide you through the process.
When you invest in property in Germany, it’s important to remember that you will also be responsible for a portion of the maintenance fees for the rest of the building. This is called Hausgeld, and usually includes building upkeep, garden/courtyard maintenance, and cleaning services for the shared spaces. Sometimes this fee includes heating and water, but you should carefully calculate how much you will need to pay monthly before buying property in Germany. Hausgeld is a monthly fee which is calculated according to the type of apartment you own, and can differ greatly from one property to the next. Most of the time, when you apply for a loan, the bank will ask how much the maintenance fee is per month in addition to your other monthly expenses in order to decide if you are able to afford the mortgage.
Appraisal before purchase
It’s not mandatory to hire an expert to appraise a property before you purchase it in Germany, so many buyers choose to forgo this step in an attempt to save time and money. However, it might be a worthwhile cost, especially when purchasing Altbau apartments (older buildings which are more likely to need reparations). These experts are called öffentlich bestellter und vereidigter Sachverständiger or Dipl. Bau.-Ing. Hiring someone who can give you a more realistic perspective of the apartment’s condition will allow you to have more negotiating power during the buying process. It will also give you peace of mind, knowing that the apartment you are purchasing is sound and will not cause issues down the line.
State subsidies for property financing
If all this talk about fees and loans has you sweating bullets, don’t worry: Germany actually has several allowances and subsidies available for property buyers. State-funded financing options are widely available depending on your circumstances, so it’s worth considering, even if you’re not a German citizen. These subsidies are mainly for first-time buyers, families of lower income, and environmentally friendly renovations or new-build apartments. They are not exclusively for German citizens, so expats are also eligable when buying an apartment in Germany!
Don’t forget about tenancy laws
If you’re an expat looking into purchasing a buy-to-let property, meaning a rented apartment which already has tenants, don’t forget that there are many laws in Germany which protect renters. Double check the notice period you have to give the tenants before you are able to use the apartment for yourself-—it could be up to ten years in Berlin, or three years in cities like Leipzig and Chemnitz. On one hand, this means that your property will likely be rented and give you a secure rental yield. On the other, if you are looking for a property that you can live in yourself in the next couple of years, it might be better to buy an empty apartment.
Don’t let the German bureaucracy overwhelm you - buying property in Germany as a foreigner is still a worthwhile investment, with high returns in a stable market. For more information on the buying process in Germany, check out our buyer’s guide. We offer many resources for first-time buyers and investors, and are happy to help you in your search!
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