Real estate and rentalINVEST IN GERMANY

Real estate and rental

Key facts
  • Very attractive market
  • No investment limitations
  • For business, private or mixed purposes
  • 10% ~ 15% additional purchasing costs
  • Can be combined with residence permit

The real estate and rental prices in Germany are relatively low compared with other countries, i.e. less than half, and in some cases just a third, of equivalent rents in other European cities. Foreign investors, both individuals and entities are highly interested in purchasing flats, lofts, office space or investment property in Germany, since the market is currently not overheated. Real estate can either be used for business, private or mixed purposes. Suitable premises (for rental or purchase) can be easily found via several sources, e.g. regional newspapers, online markets, or brokers. For investment in real estate, like any other investment, a residence permit is not necessary. But it can be combined with some business, so that a residence permit can be granted.

New industrial buildings can only be built on declared industrial land. Some less developed areas with low land prices and other advantages attract investors. Investors should contact the municipality as well as the regional business development agency. Every new building must be surveyed for inclusion on official maps.

Usually the prices are negotiable when purchasing real estate. The investor should seek advice for assessment of the value and state of the property. The purchase contract should point out the state of the building and provisions concerning warranty. Without such a survey, only serious building faults can lead to warranty claims. Banks are usually willing to negotiate financing and mortgage terms. The mentioned survey also enables the bank to determine the loan value for the real estate.

The notary certifies the purchase of a property, authorizes the change of ownership in the land register and, where appropriate, documents the debts recorded for the property (land charges).

REITs (Real Estate Investment Trusts) were introduced in Germany in 2007. Like in the USA and other European countries, this new asset class benefits from tax exemptions. Therefore it is expected to greatly stimulate the real estate and capital markets.

The following example shows the additional costs for purchase
of a EUR 100,000 property
Fee Percentage Amount
Broker 5%-6% 5,000 EUR – 6,000 EUR
Surveyor app. 1,000 EUR – 5,300 EUR
Notary 1% 1,000 EUR
Court & land registry app. 0.3% 300 EUR
Land tax 3.5% 3,500 EUR
Total costs 10,800 EUR - 15,800 EUR
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