Neubau is the new big thing
There is something about the idea of buying a new-build apartment, about being the first to live in a brand-new home. It is a hugely desirable thing, and many people’s dream. However, buying a new-build apartment in Germany is not quite like buying an existing property. Here are a few essential points that you should keep in mind, if you are considering doing so.
Buying before construction starts
A new-build apartment can be bought at practically any stage of its development, and it is quite common for them to go on sale before the developer has even begun construction. In this case, you will base your decision on blueprints and renderings of the proposed design. This can offer you considerable freedom of choice. You may have a say in the floor plan or the layout and design of the rooms. This makes it vitally important to thoroughly examine the blueprints and all documents when buying a new apartment before or during its construction. You will obviously have some protection, however, if the final apartment differs from the proposed initial floor plan. In serious cases, you can even instruct the builder to make changes to the apartment and follow the initial plans. Even if construction is already advanced by the time you purchase the apartment, there is still considerable opportunity to personalise the apartment. Often there will be different layout options, and you will generally be able to choose from a range of appliances, fixtures and fittings.
One potential disadvantage of a new construction is that, especially in the first three years, minor construction defects occasionally show up, such as cracks or moisture in the walls. The house has not yet settled, so to speak, and reworking is sometimes necessary. However, most builders typically provide a 5-year warranty (or longer) covering any necessary reworking, meaning this is generally no more than an annoyance.
Missed completion deadlines
Obviously, even with the best-laid plans, deadlines are sometimes missed. This is an irritating but largely unavoidable fact, and you may be forced to delay moving in to your new home. Depending on the stage in the construction, and the length of the delay, you will receive financial compensation for every month beyond the deadline.
One often overlooked advantage of a new-build apartment is that it is guaranteed that the heating equipment, the windows and the insulation correspond to the current energy standards laid out in the Energy Conservation Ordinance (Energieeinsparverordnung/EnEV). These standards apply to all new buildings, and mean that your energy bills will be lower than in an existing building. Additionally, your new home could be even more energy-efficient than this ordinance demands. Such energy-efficient homes require innovative heating technology based on renewable energies (such as solar, geothermal, biomass, wood, wind, hydropower) and very good thermal insulation, so they cost more to build than a "normal" new home. In these cases, you could benefit from a low interest support programme by Kreditanstalt für Wiederaufbau (KfW). Loans of €100,000 are available at favourable conditions - the better the energy standard, the higher the repayment bonus.
Higher resale value
A further financial positive to act as incentive to anyone considering buying a new-build apartment is that new buildings tend to have a higher resale value than older buildings. This means that, even though you may pay a premium to get your brand-new home, designed just the way you want it, it is likely to be worth it. New properties are also considered by banks to be better collateral than existing properties, meaning you could get more favourable mortgage conditions to finance your new home.
Financial double burden
That said, there are some potential financial downsides to buying a new-build apartment. The first, and perhaps the easiest to overlook, is the simple fact that, if your new home is bought before completion, you will be paying for your new home while still living in your old one. This double burden can put a strain on your finances, and it helps to sit down with a financial advisor to plan everything out.
Typically, the contract with the property developer on a new-build property allows you to make instalment payments at different construction phases (detailed further down). In this case, you do not need the full agreed loan amount all at once, but gradually in partial amounts. However, there is an important cost component that you must include in your considerations: the commitment interest (Ger. Bereitstellungszinsen). This is a fee charged by a lender to a borrower to compensate the lender for its commitment to lend. Basically, the bank has set aside the funds for you and cannot yet charge interest, so it charges a commitment fee. As a rule, this fee only accrues after a certain period of time. Between lenders (and indeed between mortgages) there are large differences both in this period of time and in the amount of the commitment fee. While some lenders charge a fee after just two months, other banks offer up to twelve months without additional surcharges, or in individual cases, up to 24 months. The amount of the commitment fee is often 3% per year (i.e. 0.25% per month).
As mentioned above, anyone buying a new-build property usually pays the purchase price according to a payment plan. How this plan must be arranged is regulated by the Broker and Property Developer Regulation (Makler- und Bauträgerverordnung, MaBV). This regulation lists a total of 13 different stages of construction. However, the property developer may not write an invoice for each individual stage, but must combine these into a maximum of seven instalments. The first instalment depends on when you purchase the property, and you will then make the remaining payments as construction progresses.
New-build apartments are overall a worthwhile long-term investment, and arguably make for the most comfortable and modern homes. If you are interesting in buying a new-build apartment in Berlin, take a look at our extensive portfolio here.