Country Overview | Key Property Facts

Types of tenure

Property can be owned on a freehold or leasehold basis.

Forms of ownership

Real estate may be owned by individuals as well as legal entities, including local authorities and foreign companies. There is no bar to foreign individuals or foreign companies acquiring property in Germany.

Restrictions

A solicitor or notary is required to deal with the legal work and contract and to check that there are no liabilities. A public notary must be used for the conveyance of all real estate contracts and entry of the title deeds with the local land registry.

Property rights

With regard to specific property rights, the Heritage Foundation’s Index of Economic Freedom states: “All property, including intellectual property, is well protected. Contracts are secure, and the judiciary and civil service are highly professional. Separate supreme courts deal with commercial, tax, labour, and constitutional cases.”

Mortgage finance

German lenders are very conservative and will require you to have a good financial track record prior to agreeing to grant you a loan. A mortgage of up to 70% is possible, usually at fixed interest rates for a determined initial period of 5 to 20 years. Typically the mortgage as a whole will have a 30-year term. There are mortgages available to non-residents as well as resident foreign buyers.

Issues and risks

The German property market is currently the most undervalued market in Europe. While house prices have rocketed in most of Europe for the past decade, they have barely shifted in Germany.

The process of buying property can be expensive – commissions and taxes are still high and in the case of Berlin, the land tax is higher than the rest of Germany, currently standing at 4.5%. The fact that the vast majority of people in Germany tend to rent their homes has resulted in a fairly conservative and inflexible lending system.

There are, however, positives for the German property market. Four German cities make the top 10 list of the Emerging Trends in Real Estate Europe Report 2008, compiled by the Urban Land Institute and PricewaterhouseCoopers. These cities are:

Hamburg (3rd)
Munich (4th)
Frankfurt (7th)
Berlin (9th)

The results are a mild surprise considering that Germany is not really renowned for high capital growth. Having said that, Berlin actually has some of the cheapest housing of any major European city, and this is attracting a wave of foreign buyers to the German capital, something that promises a new property boom after a false start after the fall of the Berlin Wall nearly 20 years ago.

Key Property Markets

Berlin
Like London, Berlin is a sprawling metropolis made up of a collection of “village” communities, with numerous distinctive districts and leafy suburbs. Much buyer interest is concentrated in areas located in the former Communist east of the city. Mitte and Prenzlauer Berg and Friedrichshain are among the most popular thanks to a combination of a mix of old and new architecture, a creative vibe and easy access to the city centre.

Frankfurt
Frankfurt is one of Europe’s major financial centres as well as one of Germany’s most vibrant property markets. The residential areas in the heart of the city enjoy an almost countryside peace and quiet, yet are located within minutes of the city centre. The property market offers very good investment opportunities for the future.

Munich
The capital of Bavaria, in the south of Germany, may be most famous for the annual Oktoberfest, but its charms extend far beyond the bierkellers. It has been described as one of the most “liveable” cities in the world, with a high quality of life and excellent public amenities. It’s also easily reached from all over Europe thanks to a host of low-cost and national airline routes.

Hamburg
This city state in the north of Germany is being tipped as one of the most promising investment hotspots in Germany. The Schanzen and Karolinen districts in particular are undergoing a transformation from neglected and shabby areas into chic and increasingly upmarket residential neighbourhoods.

Leipzig
Leipzig, located in the former East Germany, is a revitalised centre of commerce at the crossroads of two of Europe’s main axes of transport and development. The city’s architecture is dominated by “Jugendstil Buildings”, which are designed in the German version of art nouveau, and it has more examples of this style than else anywhere in Germany. Investments in redeveloped old buildings are an interesting option for those buying into the German market.

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