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What are reasons to invest in Germany?

We have put together some of the many reasons to invest in Germany:

  1. There are no restrictions for foreign investors!
  2. No Tax payment needed for capital gains deriving from the sale of real estate, if the property was held for 10 years, or was used by the owner for 3 years!
  3. In large cities such as Berlin, there is a 7-12% annual value increase since 2010. According to a research published in the “Guardian”, Berlin’s real estate value has increased by more than 20% just between 2016-2017!
  4. There are no university fees for local, as well as, international students!
  5. Interest rates on mortgages are between 1-2% for foreign investors!
  6. German quality construction companies that offer 5 years guarantee on properties!
  7. Less crowded and a higher quality of life than in other European cities!
  8. Growing demand for properties at larger cities such as in Berlin!
  9. Step by step payment availability on new constructions!
  10. Lower pricing compared with other big cities in Europe!
  11. German mortgage rates are among the lowest in the world!

What is Germany’s International Credit Rating?

As reported by the three major credit rating agencies: Standard & Poor's, Fitch, and Moody's, Germany have an AAA credit rating with a stable outlook. This is the highest possible rating a country can get!

Can Foreign Investors Receive real property rights in Berlin?

YES! Germany is open to immigration. With foreigners making up around 9% of its population, the Federal Republic is one of Europe’s highest-ranked countries in this respect. The foreigners living in Germany are an economically and culturally important part of German society.

Berlin city in particular for real estate investment

Berlin is one of the most attractive investment locations in Europe. This is certified by an independent ranking of the renowned international periodical “Foreign Direct Investment Magazine”. Investors pile into Berlin’s booming real estate after a record third quarter, which saw almost $3 billion of capital flowing into the city. Berlin has become the third most popular European destination for cross-border investments in 2017. Quickly rising prime rents have further fuelled investor interest in buying properties in Berlin

What are steps to take when buying real estate in Germany?

  1. Consulting: We find the property perfectly fits our client expectation. We work with lawyers and banks to prepare contracts and secure financing from possible mortgage offerings if the client wishes to get a mortgage.
  2. Reservation: After evaluating and viewing of the properties, we reserve the found property and prepare a contract with our lawyers.
  3. Notary public appointment & Contract signing: After the contract is prepared, our client needs to sign the deed of the purchase at a public notary.
  4. Payment: The commissions that have to be paid after signing the contract are 7,14% broker’s commission, 1,5% notary fees, and 0,5% for registration fees. Within a couple of weeks, usually 2-4, the buyer is asked to pay the Real Estate Transfer Tax (RETT), which is currently at 6% in Berlin. For properties that are part of a new build project, the buyer can pay the purchasing price in 7 steps according to the progress of the construction.
  5. Completion & Maintenance: After the payment is complete and the real estate is bought, our clients can choose to work with us for the interior designs or to find a tenant.

What are the costs accompanying buying property in Berlin?

In Germany, the buyer has to carry the following costs and fees:
  • Purchase Tax (“Grunderwerbsteuer“): 6% of the buying price. Due about four weeks after the notary deed has been signed by buyer and seller.
  • Notary fees. These are 1.5% of the buying price, plus any fees for a needed translation of the deed. As they can vary strongly we recommend checking (especially the translation fees) in advance.
  • Agent fee. The buying fee for agents in Berlin is 7.14% including the VAT.
  • Registration fees. These add up to 0.5%.
  • Financing fees. If financing is needed, there might also be fees from the bank for the mortgage, plus any additional notary and registration fees for that mortgage. Any mortgage needs to be secured in the land registry (Grundbuch) and that can only be done by a notary public.
  • As a general rule of thumb, the total fees are about 15% on top of the purchase price.

What are the costs accompanying owning property in Germany?

The costs associated with owning property in Germany include:
  • Property tax. Property tax varies from town to town but very is usually a small annual tax (between €150 and €300 usually for an apartment per year, a bit more for a single-house; it depends on the size of the property ground).
  • Building Reserve Fund. The building reserve fund is mandatory for owners of an apartment as part of a community; it is usually about €0.75 to €1.5 per sqm living area per month.
  • Utility fees and other service fees. Garbage disposal, water, common house electricity, housekeeping, maintenance of the heating system etc. are additional costs which sum up to about € 0.5-€ 2.0 per sqm and month. All of these have to be paid by the tenant if an apartment or house is rented out. Even the property tax normally needs to be refunded by the tenant to the owner or should be made part of the normal utility prepayments.

What is the relationship towards foreign investors?

Businesses and investors receive comprehensive support in Berlin.

A large number of attractive economic development funding and financing instruments are available, provided by the Investitionsbank Berlin, among others. Berlin Partner for Business and Technology offers special service packages which are tailored to the individual needs of businesses and which include customized economic development concepts, support with the search for real estate and qualified professional staff. The Business Immigration Service also provides practical assistance, for example for foreign businesses regarding visa matters.

Where is Berlin’s biggest potential?

Berlin's biggest potential is in the booming real estate market, the tourism business, and the growing start-up sector. Berlin is the capital and the largest city of Germany. With a steadily growing population of approximately 3.7 million, Berlin is the second most popular city behind London. Tourism in Berlin has risen moderately over the last years. The number of overnight stays by visitors to Berlin increased to 31 million, reports the Berlin-Brandenburg Statistics Office. Berlin is also ranked among the world’s leading locations for meetings and congresses.

For over ten years, the German capital has been one of the top 5 cities for international association conventions and ranked among the world’s leading cities for meetings and congresses.

Also, Berlin has a much lower buying price for apartments, compared to other capital cities in Europe!

Are there any obstacles for foreigners to buy property in Berlin?

There are no special requirements nor paperwork for foreigners wishing to buy property in Germany, so you shouldn’t have any issues.

What is Berlin’s political and Legal system?

Germany is a democratic, federal parliamentary republic, and federal legislative power is vested in the Bundestag (the parliament of Germany) and the Bundesrat (the representative body of the Länder, Germany's regional states).

The multi-party system has, since 1949, been dominated by the Christian Democratic Union (CDU) and the Social Democratic Party of Germany (SPD). The judiciary of Germany is independent of the executive and the legislature, while it is common for leading members of the executive to be a member of the legislature, as well.

The political system is laid out in the 1949 constitution, the Grundgesetz (Basic Law), which remained in effect with minor amendments after German reunification in 1990. The constitution emphasizes the protection of individual liberty in an extensive catalogue of human and civil rights and divides powers both between the federal and state levels and between the legislative, executive and judicial branches.

West Germany was a founding member of the European Community in 1958, which became the EU in 1993. It is part of the Schengen Area and has been a member of the eurozone since 1999. It is a member of the United Nations, NATO, the G8, the G20 and the OECD.

The Economist Intelligence Unit has rated Germany as "full democracy" in 2017.

What is Berlin’s tax system like in relation to foreign investments?

Individuals who are neither resident of Germany nor have their normal place of abode, are only liable to pay tax in Germany if they earn income from capital gains. This includes in particular income from real estate in Germany or a permanent establishment in Germany.

Transfer of German property is subject to a transfer tax (Grunderwerbsteuer)–the equivalent of UK stamp duty. The current level of property transfer tax in Berlin is 6%. (needs to be paid when purchasing real estate)

Vendor profit from real estate sales in Germany is considered capital gains if the real estate has been held for less than 10 years. The taxation at the source for capital income will be done with a flat tax rate of 25% +(solidarity surcharge of 5.5% of the amount of tax).

If the property is being used by the owner himself for at least 3 years, there will be no taxation for capital income.

What tax do I have to pay when selling the property?

German law currently provides that if you sell a rental property within ten years of the purchase date, any appreciation of value is taxed. Again, this follows the sliding scale rule. But watch out: any depreciation claimed in that period is voided or added to the sales profit. This applies only to property which was rented out. Owner-used property can typically be sold without the tax on the profit after two years.

After the ten year holding period, any gains are tax-free for private persons. However, this is not true for property owned by corporations. In such circumstances, we strongly recommend that you consult with a tax advisor.

There is another tax-trap that you should be aware of. There is a rule that if you sell more than three properties within five years you are considered a commercial property dealer. The consequence is that you have to pay commercial tax (Gewerbesteuer)! And your profit is not tax-free even if the ten years holding period is over. Take the example of a multiple dwelling which you purchased as one unit and want to subdivide and sell as several units after ten years. Selling off more than three units out of that house makes you a taxpayer on commercial tax which is about 25%.

What are other reasons for investing in Germany?

At the centre of Europe
Germany's central location within Europe gives investors access to the entire market of the European Union as well as the markets of Central and Eastern Europe.

The most important market in Europe
With the highest GNP and the largest population in the European Union, Germany is Europe's most important market.

A Leader in growth industries
Germany is a leader in modern information and communications technologies and boasts an infrastructure that is virtually without parallel in the European Union. 

Services for investors
Germany offers investors efficient and unbureaucratic support for their plans to establish new locations here. The organizations charged with administering economic development assistance offer robust support and help companies search for locations, recruit personnel and secure funding.

Advantages of doing business in Germany

Germany is becoming increasingly attractive as a location for business in international comparison. The restructuring of the East German economy according to market principles has created a new dynamic nature and innovative spirit. Germany has become the centre of Europe. As an economically important member state of the European Union, Germany stands for innovation, advanced technologies and high levels of productivity.

The Political system of the Federal Republic of Germany

Long-term stability and the ability to plan ahead are important factors when deciding whether to invest or pursue other economic engagement in a given region. Germany has a state infrastructure that functions extremely well while ensuring social order and creating a level playing field across the entire country.

The social welfare system of the Federal Republic of Germany

Guaranteeing the welfare of individuals is a primary focus of the German political system. Social security is fundamental to a high quality of life. The welfare state is based on the principles of solidarity and individual responsibility. Germany's social safety is based on a network of laws in all of the states designed to provide security for individuals in case of sickness, disability and old age as well as policies that provide allowances for dependent children and housing.

Associations and interest groups in Germany

After the Federal Government relocated from Bonn to Berlin, many large German associations have followed suit by moving their headquarters to the new capital on the Spree. As the seat of the Federal Government and many of the country's most important industry and trade groups, Berlin is a political and economic centre in Germany.

Federal and state taxes 

The taxes collected by the state allow it to fulfil its responsibility of promoting the public good in fields such as social welfare, education, infrastructure, and healthcare. Accordingly, the measures taken under tax policy contribute to the promotion of investment and improving Germany's competitiveness in the global economy.