So many professional expats are calling Germany home these days and with long term mortgage rates at extreme lows and rental prices increasing in many areas it is little wonder that many are looking at the option of buying an apartment or house.

The following are meant as guidelines only. We would always recommend consulting with a real estate agent (Immobilienmakler), attorney (Rechtsanwalt) and/or tax consultant (Steuerberater).

The current situation

Basically, this is a good time to purchase a house or apartment. Especially as long term interest rates (ECB) look set to stay very low for some time to come.

There is a dichotomy of property pricing between more rural and small town locations compared to the major cities such as Frankfurt, Munich, Berlin, Dusseldorf and Hamburg. Many of the larger towns have also seen a significant price increase, both for rentals and purchasing prices.

Purchasing prices in Germany remain moderate overall in comparison to many other economic hotspots.

Unlike many other countries, Germans tend to buy property for life. They don’t often see the more typical, Anglo-Saxon practice of buying now and continuously upgrading. This explains why there are fewer real-estate market price fluctuations, though the demand for choice locations remains high. It is generally wise to invest in properties in better areas. Location, location, location is still a key mantra when looking to purchase in Germany. A good infrastructure of transport, schooling and business desirability often pay dividends in the long run.

The percentage of Germans owning their homes is surprisingly low compared with elsewhere. At about 52% percent, it is the lowest in the entire European Union. However, this has grown from about 46% in 2014. This significant growth rate is expected to continue in key locations. As in other countries, the ratio differs according to income levels. The more affluent people are the more likely it is that they will own their own property.

It could be that extensive expatriate home purchases could cause this rate to rise further. There are no legal restrictions on non-Germans owning property, and many expats have significantly higher income levels and housing aspirations. This, coupled with an inability for the ECB to increase deposit rates at this time, is causing capital flows to seek property investment as a way forward in many markets. The only bar to foreign ownership of property might lie in the financial institutions that offer mortgages.

See our article on Mortgages in Germany for more on this topic.

What's it going to cost?

Before going into the typical cost of German homes, it must be taken into consideration that homes in Germany, and all other European countries, tend to be smaller than those built in North America. The more than 82 million people in Germany live on a land surface only 1/35th that of the U.S., which has a population of about 327 million. That means that Germany has only 1/9th as much living space. And much of that land is heavily developed. So prices are much higher. It should also be noted that properties in Germany are, for the most part, very well built using quality materials while adhering to strict building codes. Most properties are built with masonry as the primary material, inside and outside.

Prices of homes and apartments vary widely throughout Germany. And can also vary widely within each Federal State. In the countryside prices tend to be much lower. Some German States have lower average prices than others. Houses and apartments in many larger cities are expensive as well as those in the metropolitan areas that surround these cities. The former East Germany generally is cheaper than the former West for the same size house or apartment in a similar demographic area. (Berlin is an exception to this generalization.)

Many of the real estate websites in Germany have some sort of analysis and breakdown of regional (and sometimes city) prices for homes and apartments. These prices are normally based on the listings on their particular website. They track the prices of their listings over time so potential buyers can get a feel for market movements.

It’s well recognized that the prices of houses and apartments in Germany over the last 10 years have increased more steeply when compared to previous decades. The average price for both houses and apartments throughout Germany has gone up and certain metropolitan areas have seen very substantial increases since 2011.

According to the website, in 2011 the average price per square meter for a 60 square meter apartment in Germany was about €1,520. In 2018 the price was about €2,830. A 60 square meter apartment in Munich has risen from about €3,700 per square meter to just over €7,750 from 2011-2018.

As far as houses are concerned the average price for a 150 square meter house in Germany rose from just over €1,700 per square meter in 2011 to just over €2,080 in 2018. In Munich the price for a 150 square meter house went from about €4,130 per square meter in 2011 to about €7,226 per square meter in 2018

Also, according to the website, the city-state of Bremen is one of the least expensive of the larger cities. A 150 sq. meter house would cost about €2,300 per sq. meter. At the other end of the scale the Bavarian capital of Munich is far and away the most expensive. The same house could possibly cost an overwhelming €7,227 per sq. meter! A smaller house in Munich (around 100 sq. meters) would cost about €7,793 per sq. meter. Other cities with high prices for the 150 sq. meter house include: Frankfurt – about €4,485 per sq. meter; Hamburg, about €4.280 per sq. meter; Berlin – €3,235 per sq. meter; Köln – about €4,264 per sq. meter. Key locations in some of the major cities can now significantly exceed €10,000 per sq. meter.

How to find a house or apartment

As in every country there are certain procedures for finding an apartment or house and closing the sale. It makes little sense in Germany to look for a “For Sale” sign in front of the house. This is not a common way of offering property. Many offers are published in newspapers. In the last few years various websites have sprung up that provide extensive listings on apartments and houses for sale as well as rental units. These websites also have extensive information on financing and other topics related to buying and renting property.

Some ads state that the property is von privat, which means that no real estate agent is involved. Most offers, though, are made through such agents (Immobilienmakler). A potential buyer should carefully research the property when buying a house in Germany. Many of the “inexpensive” homes advertised may require renovation investments well beyond the purchase price.

Another “warning signal” can be: grosszügige Räume, meaning “large rooms” or “very spacious.” What that really means is “very expensive to heat.” And watch out for the property that is für Schnellentschlossene (for quick decision-makers). That probably means the home has been on the market for a long time and may not be very desirable.

House-hunting is time consuming. In most cases newspaper ads don’t give addresses, meaning you must make an appointment with a go-between or agent. Many website listings however include full addresses as well as maps.

As a buyer, it is generally advised not to sign an “exclusivity contract” with any one agent. You may wish to peruse a wider range of offers from several agents. And ask the agent at the outset who is paying his commission and what the percentage is.

Currently except with rental contracts, there is no law regulating commissions. This may change in the near future. It can be negotiated, and in most cases can be between 3 and 7 percent of the purchase price. In some cases the buyer pays the commission in full, in many others it’s split between buyer and seller and in some instances agents receive their commission exclusively from the seller.

An agent may submit an invoice only when he has clearly arranged a notary contract between buyer and seller and this contract has been completed. An estate agent should provide a potential buyer at a viewing or upon request with the full address and name of the seller as well as the necessary information on the property including the energy efficiency certification, blueprint, square meterage, partition deed, protocols of owners meetings and annual costs (where applicable).

If a potential buyer gets an offer from one agent for a house that another agent has already offered, it is advisable to tell the second agent immediately. Otherwise the customer may wind up paying a double commission.

Once a property has been purchased there will be additional (closing) costs. These can vary from 5% to 15.4% of the purchase price, depending on location and estate agent fees.

Interpreter fees would be extra and should be discussed with the notary. German notaries are obliged that you can either understand the reading of the German purchase contract or have a suitable interpreter with you at the signing.

Once the buyer and seller have agreed on a purchase price, the property sales contract must be signed in the presence of a notary. This is to the advantage of both parties, and particularly the buyer, since it provides assurance that the entire transaction is carried out in accordance with the law. The notary fee, of about 2% of the purchase price, covers preparation of the contract, negotiations, the signing ceremony and entry in the land register.

Notary duties and responsibilities

The notary is legally bound to act as an impartial middleman between buyer and seller. He or she checks the land register to see whether the property can be sold at all; and if it can be, whether there are any restrictions on its use. The contract spells out the obligations of each party and the measures to be taken in the event of default. Once it is signed, the notary registers the change of ownership with the municipal government and enters the property in the land register.

It isn’t widely known that the buyer may choose his or her own notary, and it is recommended that expatriates exercise this option, choosing a notary who speaks English.

Always ask for a copy of the purchase contract before going to the notary, reviewing it carefully and having it translated if necessary. Prepare any questions you have in advance, don’t hesitate to ask them and allow sufficient time for getting full answers. It is advisable that, if a mortgage is required for the purchase, that this is fully agreed before signing at a notary. It is not the notary’s responsibility to know if you have adequate financing.

At the actual signing ceremony the notary reads the contract of sale verbatim and is required to be certain that both parties fully understand its content. All parties may ask questions and interrupt the proceedings if a clause isn’t completely understood.

Normally all parties must be present at the signing, however a proxy can be appointed by either party. If this is the case then it should be discussed and agreed with the notary in advance, as further (identification) procedures will be required.

The contract

Among the most important things a contract must show are:

  • Whether the names and addresses of the parties and the details of the property are correctly noted. This is crucial as an error, especially in the property details, could at least partially invalidate the contract.
  • The agreed upon purchase price and terms and conditions of payment.
  • Stipulations as to what happens in the event either party fails to live up to the terms of the contract.

The parties have complete freedom to decide on payment terms. In many cases the buyer has to obtain financing. Therefore the seller agrees to a priority notice in the land register that protects the buyer from other, unexpected sales activities on the part of the seller, such as trying to sell the property to somebody else for a better price.

The land register is located at the district courthouse and is the central document for a piece of property, with all necessary information on its ownership. An actual change in ownership can occur only when an entry has been made in this land register, and only when previous mortgages have been taken care of and the tax office has certified that the seller has no property taxes outstanding.

Sometimes the purchase price is first paid into an account maintained by the notary (Notaranderkonto) and transferred to the seller only with the land register entry is complete.

The notary is not responsible for the correctness of the owner’s property description. This is the buyer’s due diligence.

The seller isn’t obliged to point out any major defects that should have been obvious to the buyer, though he should be required to describe any hidden defects.

A copy of the most current land register entries can be obtained on application to the district court. However, only persons with a legitimate need to know, such as the owner or the notary, are eligible to make this application.

The register also spells out the rights of any third parties; those, for example, of tenants. Such tenants can’t bar the sale of the property, but the new owner is bound by any lease arrangements to which the previous owner agreed. Hence, the new owner can’t evict a tenant before the lease expires.

Financing your house or apartment

It is highly recommendable, should a mortgage be required, to shop around for rates and not to just accept the first offer from your bank. Of course a buyer should not commit to financial plans that are beyond their resources. It is often recommended having at least 20 percent of the total cost for a down payment.

Recent EU wide regulations for the banking industry are requiring bankers to take a closer look at home buyers from Germany as well as other countries and those whose earnings may be in some other currency than the euro. Stricter terms for mortgages may result from the enhanced scrutiny.

Interest rates for mortgages are presently below the long time average, ranging (according to most sources) between 0.61 percent and 2.87 percent, depending to some degree on the duration of the financing plan and down payment. Most mortgages are for 10 or 20 years but could be up to 25 years or as low as 5 years. (Figures as of April 2019).

Prognoses by banks and other parties see long term stability in interest rates, perhaps with slight up or down fluctuations. It is possible to decrease the total amount of interest paid by integrating a “Sondertilgung” (option for additional annual repayment) into your mortgage. This is normally 5 to 10% of the original mortgage amount. The greater this payment is, the less will be the interest costs in the long run.

As mentioned before, financing is a matter that requires individual, specialized advice. Getting professional advice from a bank specialist and/or a tax consultant is highly recommended.

The purchase or construction of housing for your own use can, under certain circumstances, be subsidized by the government in Germany via KFW-loans and other state/regional supported programs. There may also be some tax advantages involved. Here it is especially important to get personalized counsel from a mortgage advisor, bank or tax consultant.

Of course there are further regulations covering many more details. It is therefore advisable to check each individual situation with an appropriate advisor.

Click here for our article on mortgages and home financing in Germany