Buying Property in Germany
Guide to Buying Property in Germany
The German property market is currently the most undervalued market in Europe. While house prices have rocketed in most of Europe for the past decade, they have barely shifted in Germany. The German market is certainly not to be underestimated though, accounting for almost a quarter of Eur 100bn invested in European Real Estate in 2006, up 8% in 2005.
The news is not entirely positive however, with some analysts already pointing out the associated potential risks if buying property in Germany. The process of buying property is not hassle-free, as some press coverage misleads. Commissions and taxes are still high and in the case of Berlin, the land tax is higher than the rest of Germany, currently standing at 4.5%. Another bottleneck is that market prices are rather difficult to pinpoint with the market being so opaque.
This along with the fact that the vast majority of people in Germany tend to rent their homes, has resulted in a fairly conservative and inflexible lending system. However this has now started to shift with the market sparking a much more optimistic mood. Banks however, do tend to look at the release of large loans and this poses a threat to the individual investor wanting to purchase one or two properties in Germany. As long as research is carried out extensively and due diligence is rigorous, the rewards can be fairly generous indeed. It is notably important though, that the investor is looking at a medium to long-term investment strategy ranging from 5 to 15 years, since quick profits may not be on the horizon.