Buying property in Germany
Economy of Germany is booming. For example, Berlin's GDP grew by 4.6% in 2016, outperforming the national average by 1.3 percentage points. The country's population is growing by more than 1% annually, largely due to millennials attracted to the country's for its vibrant culture, and for employment. Germany is home to regional offices of corporations such as Mercedes-Benz, Rolls-Royce and BMW. It is also an international start-up centre – a new company registered here every 20 hours.
Real estate prices are constantly rising:
- The average residential property price in Germany more than doubled to €4,136/m² between 2011 and 2016.
- The average residential rental rate in Germany grew by 70% in the same period to €11.24/m² per month.
Choosing a property
- The buyer decides on the purpose of the purchase, property type, and budget.
- The buyer signs a brokerage agreement with an agent – this obliges the buyer to pay the agent's fee, which is typically 3% to 7% of the property value, including VAT.
- The buyer decides on a property.
- The buyer's presence is only required for two procedures: opening a bank account and registering a legal entity. For the other stages of choosing and buying a property in Germany, power of attorney can be given to a his representative.
Reserving the property
- The buyer signs a reservation agreement with the agent and pays a 10% downpayment.
- The buyer opens a current account with a German bank to pay for the purchase (this account can be used later to pay taxes, utility bills, compensate for accounting services and to receive rent).
- To open a bank account, banks require the applicant's CV, passport and documents proving the legal origin of funds. The Know Your Customer (KYC) regulation obliges banks to perform customer due diligence. Opening a bank account usually takes five to seven days, though in some cases KYC takes several weeks to complete.
- The buyer orders a due diligence report, which may include a technical audit, legal review, tax analysis and transaction risk assessment. This takes about 1 month and costs 0.5% to 1.5% of the property price.
- The buyer applies for a mortgage if necessary.
- Non-residents can get 40% to 70% LTV loans at 1.5% to 2% per annum. The average loan term is 15 to 20 years. Mortgage costs comprise about 1% of the loan amount, and are paid by the buyer upon the issuance of a loan.
Signing the agreement
- The buyer hires a notary, who draws up the sales agreement and negotiates details of the transaction.
- The buyer and seller sign the sales agreement in the presence of a notary.
Registering and paying for the transaction
- The buyer pays the remaining property costs and receive the keys.
- The buyer pays a transfer tax, which is 10% to 15% of the property value.