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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.
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