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March 21, 2008

Property Investment in Germany

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by Brian Turner

Germany

Property Investment Guide to Germany

Germany’s property market is moving along, but the pace is painfully slow. The market has actually been decreasing slightly since 2000. There was some increase in 2007, but only around 1%. The market in Germany is much less desirable than other countries in the region.

There has been a large oversupply of developments (spurred on by the tax incentives that were offered) that is helping contribute to the slow market. Economic slowdown has also effected the purchasing of new property by the local community. As Germany continues to regain a foothold in the economic community of Europe, this trend is likely to change.

Rental property will most likely offer the better yields. They are expected to produce around 6%. Some experts predict that 2008 will show consistently high yields in the rental market. Few Germans are home owners so this could be a strong market for foreign investor.

Foreign nationals are unrestricted when it comes to purchasing property in Germany. The fees are rather low, with the Broker’s Fee being the highest but also being split evenly between the buyer and the seller. On average, transaction costs will be less than 13% of the purchase price. It takes around 41 days for the new property to be registered in Germany.

Some Terms to Know

Grunderwerbsteuer – this is the transfer tax the buyer pays. It is based on a percentage of the purchase price and is usually due about four weeks after the notary deed has been signed by both parties.

Grundbuch – the land title register (usually found in the district courthouse) is the only official document for land in Germany. Entry must be made before ownership will take effect.

Notary Fees – the amount paid to the notary for the completion of papers. It is set by law and will usually range between .5% and 1.5%.

Registrations Fees – the amount paid to register a property by having the buyers name entered into the local land registry as the legal owner. It will usually run from .2% to .5% depending on the property being purchased.

Legals and fees

At the signing ceremony all documents will be read aloud, in German. It is advisable that you bring along a qualified translator is you are not fluent in the German language.

The larger cities have better yields on rental property.

The households of renters in Germany are the largest percentage of any country in the world (58% are renters).

All sales and purchase agreements must be notarized.


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