Germany

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Why Invest In Germany?

- Unbelievably attractive purchase prices
- Capital growth potential
- Higher investment returns than the UK
- Euro mortgage rates are lower than the UK
- Stable, long term residential tenants
- Strong and improving economy
- Regulated legal system and EEC protection
- Unbelievably attractive purchase prices

For the 10 years, 1994 - 2004 property prices fell in Berlin and only in the last three years has this position stabilised. Investors have realised that Berlin property is now one of the least expensive in Europe. Prices in Berlin are below those of Budapest, Prague and Warsaw and when compared with other Western capital cities Berlin appears remarkably inexpensive. Property is available in the German capital at less than €1,00.00/m² (around £650.00/m²) which compares with London typically in excess of €7,500.00/m² (around £5,000.00/m²) or Paris at €6,000.00/m² (£3,500.00/m²).

Add to the mix the recent development in tourism (up 16% last year), the availability of cut price flights and the sheer fun of a city which has thrown off the past shackles of the Wall and is rapidly becoming the liveliest and most interesting city in Europe.

Capital Growth Potential

With only 14% of Berliners owning property historically there has never been a strong domestic market for purchase of property. This probably reflects the unique status of the previously divided city and its island-like position in a communist sea. Of course now this has changed.

Overall 40% of Germans own property and therefore the opportunity to invest in Berlin becomes more obvious. The market in Berlin is not wholly influenced by the influx of comparatively wealthy Brits throwing their equity at cheap and cheerful holiday apartments - Bulgaria, Spain and Cyprus come to mind. What there is a long-standing market correction fuelled by a surging German economy, falling unemployment and a desire to invest.

Higher Investment Returns than the UK

- A typical return from a fully tenanted block of apartments (or a single unit) is between 4% and 10% with mortgage rates of as little as 3-4%.
- Euro mortgage rates are lower than the UK
- There is a healthy and competitive mortgage market available in Germany with English banks taking an increasing interest. Mortgages are fairly easy to obtain, with banks typically lending 50-60% of the valuation. Rates can be as low as 4% and can normally be fixed over several years.
- With rental income typically at 4-10 % (or more) it's not difficult to see the attraction of buying in Berlin! Perhaps this explains why in recent years a number of major players have made significant investments. For example, Terra Firma, a British private-equity firm, in 2006 reportedly bought a package of 150,000 flats, many of them in Berlin.

Stable, Long Term Residential Tenants

Historically the market is very different from that in the UK. Renting has always been the long term option for the majority of city dwellers in Berlin. Rental contracts are typically for an unlimited period and families often reside in the same apartment all their lives, with their children following on! It can be very difficult to remove a long term tenant but this does deliver a very reliable rental return to the investor.

Strong and Improving Economy

The unified Germany has had a tough time incorporating the old, East German economy requiring significant restructuring which has been necessary to meet the challenges of European economic integration. Germany now has the fifth largest economy in the world with falling unemployment and a 2.2% growth rate recorded in 2006.

Germany has the highest gross domestic output within the European Union as well as the largest population which now exceeds 82 million. In terms of the global trading of goods and services Germany is second only to the USA.

Germany stands out as a centre for business through innovative and internationally active companies, qualified and motivated employees, an internationally recognised education system, an excellently developed infrastructure, as well as top achievements in research and development. Germany is back as the power house of Europe and Property prices are moving to reflect this!!

Regulated Legal System and EEC Protection

Germany is a modern constitutional state, a democracy at the heart of Europe. Germany also has a legal system that protects the rights of individuals and supports them to enforce these rights. The systematically structured and balanced legislation creates security, because it uses transparent decision criteria that can be understood by all.

Operating within the EEC the investor has all the protection that has been enjoyed within the UK and Ireland. Can this be said for investors in Morocco and Dubai for example?

The Buying Process

The buying process in Germany is quite similar to that in the UK. The main difference is the requirement to have the contract signed in the presence of a notary. Once you have found a property that you like you make a formal offer. With the sale price agreed you will be required to place a reservation (a small deposit), this is normally €3,000.00. At this time you will need to have a solicitor who is employed by you to look after your interests. It is also quite common to give your solicitor 'Power of Attorney' so that they can continue to represent your interests and indeed subsequently complete your purchase at the notary without your presence.

The purchase contract will include all property details such as the agreed price, completion date, payment conditions and stipulations regarding either party withdrawing from the purchase.

In order to complete on the sale, both parties need to be present to sign the final contract before the notary. With 'Power of Attorney' your solicitor will complete the formalities on your behalf. Naturally all discussions are in the German so if you decide to be present you may need a translator. You will need to have a valid passport to process your purchase. Once the contract has been signed the deal is complete, and the notary will list the change of ownership with the land registry.

With regard to buying costs you will need to allow 8-10% of the purchase price for property transfer tax; solicitor; notary charges etc. If you require a mortgage there will probably be an additional 1% arrangement fee. Mortgages are readily available through most German banks and typically are offered at 50-60% of the purchase price. As in the UK you will be required to demonstrate that you can make the mortgage payments. You may, of course, find it more convenient to arrange finance in your home country.

Frequently Asked Questions

What is required to reserve an apartment?
In order to reserve a property a deposit of €3,000.00 and a copy of your passport.

The apartments for sale are tenanted - how does this work?
The classic investment product! The properties currently featured on our web site all have long term tenants who in fact pay for the "running costs" of the apartment. This includes not only the obvious costs such as electricity, water, etc but include maintenance, minor repairs and rental management. All the costs associated with the property management company are paid on a monthly basis by the tenants.

It is the monthly rental being paid that provides such a solid investment return to the buyer. Yields are generally in 4-6% range offering an investment which is effectively self financing. However, it is the capital appreciation that is the real potential - we believe property prices in Berlin will double over the next five years!!

What is the buying process?
The buying process in Germany is quite similar to that in the UK.

The main difference is the requirement to have the contract signed in the presence of a notary. Once you have found a property that you like you make a formal offer. With the sale price agreed you will be required to place a reservation (a small deposit), this is normally €3,000.00. At this time you will need to have a solicitor who is employed by you to look after your interests. It is also quite common to give your solicitor "Power of Attorney" so that they can continue to represent your interests and indeed subsequently complete your purchase at the notary without your presence.

The purchase contract will include all property details such as the agreed price, completion date, payment conditions and stipulations regarding either party withdrawing from the purchase.

In order to complete on the sale, both parties need to be present to sign the final contract before the notary. With 'Power of Attorney' your solicitor will complete the formalities on your behalf. Naturally all discussions are in German so if you decide to be present you may need a translator. You will need to have a valid passport to process your purchase. Once the contract has been signed the deal is complete, and the notary will list the change of ownership with the land registry.

With regard to buying costs you will need to allow in the order of 8-10% of the purchase price for property transfer tax; solicitor; notary charges etc.

If you require a mortgage there will probably be an additional 1% arrangement fee. Mortgages are readily available through most German banks and typically are offered at 50-60% of the purchase price. As in the UK you will be required to demonstrate that you can make the mortgage payments! You may, of course, find it more convenient to arrange finance in your home country.

What are the Approximate Buying Costs?
With regard to buying costs you will need to allow in the order of 8-10% of the purchase price for property transfer tax; solicitor; notary charges etc. If you require a mortgage there will probably be an additional 1% arrangement fee. Mortgages are readily available through most German banks and typically are offered at 50-60% of the purchase price, subject to status. For investing in Berlin you should assume that you will probably need to deposit 40% of the purchase value with the rest available via a mortgage. It's possible you may find it more convenient or beneficial to organise your finance in your home country.

Unlike the UK, it is normal in Germany for the buyer to pay the estate agent fees, however, we have negotiated an excellent deal with the owners who will pay us directly hence saving you this expense!!

What is the Rental Guarantee?
The rental guarantee is provided through the property management company which is one of the most successful currently in the Berlin area. As they know the rental market so well, and remember 88% of Berliners rent, they are able to underwrite the rental guarantee. This works by offering a guaranteed level of rent per square metre over a ten year period. All the costs associated with the property management company are paid on a monthly basis by the tenants.

What are the Costs Associated with Managing the Property?
Each of the developments featured on our web site has a property management company in place. This company typically undertakes all the property maintenance and management services including minor repairs, redecoration, garden maintenance, rental management services, etc.

These services are paid for on a monthly basis as an element of the rent paid by the tenants. Additionally tenants also pay for the "running costs" of the apartment. This includes not only the obvious costs such as electricity, water, etc but include maintenance, minor repairs and rental management.

What Capital Gains Tax applies on Re-sale?
Capital gains tax applies on re-sales within ten years of purchase and is applied at the income tax rate of the owner on the gain in the property value. After ten years there is no capital gains tax liability and, interestingly for investors, if you were to re-invest your return from the sale in a further property then this also mitigates any tax liability.

What Mortgage Facilities Packages are available in Germany?
Most German banks are offering mortgages to UK and Irish buyers subject to status. Interest rates are typically around 5%, however, a number of clients source their finance in the UK where the borrowing levels are generally higher and the practicality of managing arrangements in English are preferable. German banks are generally prepared to finance 50% of the purchase price with 60% possible subject to status.

How do Rents Increase?
There are restrictions on the level of rent rises in Germany. Overall rents cannot increase by more than 20% in a three year period. In practice, market forces tend to apply and rent increases are managed by the property management company which can best utilise its local knowledge. Statistics are available publicly through local town halls indicating the levels of rent per square metre in any neighbourhood.

In some cases rents are controlled, typically where grants have been utilised to undertake modernisation but these do have a determined time span. Similarly, rents can be increased after a private modernisation but will still need to reflect rents achieved for similar quality properties in the local area.

These particulars do not form parts of any contract and are for guidance only. Measurements are approximate. Intending purchasers satisfy themselves as to accuracy of details given to them either verbally or as part as this brochure. Such information is given in good faith an is believed to be correct. However, the developers or their agents can't be held liable for inaccuracies. Prices are subject to change.

Region Information - Berlin