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Buying a property

Buying property in Germany is not to be undertaken lightly.

The German population aren’t typically home owners. Making a large purchase is considered a once-in-a-lifetime activity, unlike the US and UK property markets. Renovation, selling for a profit, and moving up the property ladder which is an ideal and a realistic way to make money (economic downturns in the market notwithstanding) in other countries is not as viable in Germany as the market simply doesn’t move as quickly. On the plus side, prices remain stable and tend to increase consistently but without the bubbles created by fast-moving markets elsewhere.

On the downside, supporting (or perhaps creating) that slow turnover is a tax disincentive and carries high transaction fees. In Germany, buying and selling a property quickly comes with a financial penalty — capital gains tax must be paid on anything owned for less than ten years. When added to transaction fees of between 7-12 percent of the purchase price, you’ll want to carefully consider whether you buy or not. Any expat not fully committed to a ten-year or more stay in Germany should consider renting.  Finally, there are no restrictions on foreigners buying property, so not only do you not have to be a citizen to buy a house, you don't even have to be resident either. This would allow an expat to leave the country, rent their property, and wait for the ten years to expire without losing money.

If you decide to purchase a home, clarify up front who is paying the estate agent fees. These are usually around 3-7% and commonly paid by the seller, but not always. You can find homes advertised in a range of online and newspaper ads, but many of these will be printed in German so it might prove practical to start with an English-speaking estate agent. It may also take up to a year to find a property in a desirable area, and it’s advisable to purchase an unoccupied property if you’re buying it to set up as your home as it can be hard to remove tenants.

  • Work with an estate agent to search for a property. They will supply additional information on the property and keep you informed when a new property is put up for sale.
  • Once you've found a property, you’ll make an offer and enter negotiations. A deposit of around twenty percent is normal, but expats often pay more as they are considered higher risk. Most German banks will offer a mortgage, and some will have English-speaking staff to assist, but this is not always the case.
  • The notary will check for issues with the property and register the transfer of ownership. If any problems with the property are found, the sale cannot proceed until these are sorted out.  For this reason, it’s best to use the notary as an escrow to hold the purchase funds until the sale is finalised. If you can’t find a notary who speaks English, contact the British or American embassies for assistance.
  • Remember, if you sell within ten years you may need to pay capital gains tax of 25 percent, and you will normally pay the agents' fees. Otherwise, the process is relatively straightforward.
  • No matter what sort of living arrangements you decide on, let our experts help you get organised before you move.

Purchase prices drop during pandemic

At the beginning of 2020, purchase and rental prices were trending upwards but began to decline in mid-2020. This trend could be due to Germany’s fluctuation of coronavirus cases, in which the country saw large spikes in cases towards the end of 2020 despite carefully managing the pandemic during the first wave.

For our 2020 Global Housing Market Trends report, we analysed rental and purchase data from 2015 to mid-2020 to understand the impact of COVID-10 on buying and renting properties. The metrics used were:

  • Price-to-rent ratio — the average cost of ownership divided by estimated rental cost. Higher values suggest that it is better to rent rather than buy
  • Price-to-income — a ratio of apartment prices to average disposable income. Lower values mean more affordable housing
  • Mortgage as a percentage of income — a ratio of mortgage costs to take-home family income. Lower values mean more affordable housing.

In Germany, we found that price-to-income and mortgage as a percentage of income both saw a decrease of 0.7%, while price-to-rent ratios dropped inside and outside the cities by 0.9% and 2.9% respectively.

Aetna International Global Housing Market Trends Graphic for Germany between mid-2019 and mid-2020 Aetna International Global Housing Market Trends Graphic for Germany between mid-2019 and mid-2020
Aetna International Global Housing Trends Graphic for Germany between mid-2019 and mid-2020 Aetna International Global Housing Trends Graphic for Germany between mid-2019 and mid-2020

In general, these findings suggest that buying is more favourable than renting — house prices are more affordable and renting is more expensive. So, while expats and nationals may be taking advantage of the attractive buying market, time will tell if this trend will continue or reverse.

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