Why invest in Germany?

The ongoing rejuvenation of Germany’s key cities makes them excellent destinations for buyers looking for a foothold in Europe with the potential for excellent returns on investment. Berlin is an emerging technology hub, with Twitter, Uber and SoundCloud among the tenants flocking to the German capital. Frankfurt, home to the European Central Bank, is already an established financial centre.

Where to buy?

Berlin is a dynamic city, with a young population and strong technology industry ties. Formerly run-down neighbourhoods have been transformed into fashionable, hip hangouts and a new international airport is improving the German capital’s connectivity. Frankfurt’s international transport links, world-renowned financial marketplace and established infrastructure appeal to investors seeking sustainable growth and long-term returns.

Source: Jones Lang LaSalle

Acquisition Costs

A Real Estate Transfer Tax is charged at a basic rate of 3.5%, but the actual rate you need to pay varies from state to state. A 6% rate is applicable in Berlin and Frankfurt, with some states charging up to 6.5%. The Transfer Tax has to be paid around four weeks after the notary deed has been signed by both the buyer and seller of a property. Under German law, you must pay a Registration Fee of around 0.5-1.2% of the value of your property to have your name entered in the local land registry. It is also a legal requirement for sale and purchase agreements to be notarised. Notary Fees range from 0.5-2% of the purchase price.

Holding Costs

Property Tax on all German real estate assets must be paid on a quarterly basis or in full at the beginning of each year. The amount varies depending on the property’s size and location but is normally a very small amount.

Disposal Costs

If you hold a German property for more than 10 years, you can avoid paying Capital Gains Tax when you sell or dispose of it. Other exemptions may also be possible. If no exemption applies, the profit is classed as income and is taxed accordingly. Under German law, Inheritance Tax is calculated for each beneficiary individually, depending on the value of the inheritance and their relationship to the deceased. There are additional exemptions for spouses.

Source: Jones Lang LaSalle

Think long-term when buying a home in Germany. Property prices in Berlin and Frankfurt are expected to continue to rise, so holding a property for more than ten years should allow for steady capital appreciation while helping you avoid paying tax on the profits earned. Vacancy rates are below 1.5% in most German metropolitan cities, with demand for residential property heavily outweighing supply, so leasing your property is a good way to make a stable income.

Letting Costs

Overseas investors must pay German Income Tax if they make money from letting their German property. This ranges from 14-45%. Non-German residents do not qualify for tax-free allowances, but mortgage interest, management fees and any depreciation in property value are tax deductible.
Management Fees range from €15-22 per unit per month, excluding Value-Added Tax (VAT), while Letting Fees are 1.5 times the monthly rent, excluding VAT. Service Charges can vary.

Source: Jones Lang LaSalle