When it comes to owning a house or an apartment in Germany, Munich is the most expensive city in Germany. Average prices for houses and apartments are generally over two times higher than the German average and there are no signs that this might change soon. Although property prices in the Bavarian capital have risen over 40% in the past decade, the prices in Munich are not a bubble, but a consequence of high demand for living space.
The Economist wrote about the German real estate market about year ago: “But the rise in prices looks more like an overdue adjustment than a bubble. An analysis by IW Köln, which takes into account mortgage rates, forgone interest from other investments and likely future price rises, concludes that changing economic conditions more than justify the rise in prices.”
Consequently, investing in property in Munich doesn’t seem to be a bad idea. Below is our “how to” on buying property in Germany and Munich specifically. Below is a table showing rental yields in Berlin, Frankfurt and Munich.
|Last Updated: May 30, 2015|
|BERLIN - Apartments||COST (€)||YIELD (p.a.)||PRICE/SQ.M. (€)|
|TO BUY||MONTHLY RENT||TO BUY||MONTHLY RENT|
|40 sq. m.||148,000||437||3.54%||3,700||10.92|
|75 sq. m.||303,075||844||3.34%||4,041||11.25|
|120 sq. m.||501,240||1,390||3.33%||4,177||11.58|
|200 sq. m.||978,000||2,308||2.83%||4,890||11.54|
|FRANKFURT - Apartments|
|50 sq. m.||211,800||691||3.91%||4,236||13.81|
|75 sq. m.||397,375||1,122||3.39%||4,675||13.20|
|120 sq. m.||639,480||1,757||3.30%||5,329||14.64|
|200 sq. m.||1,256,800||n.a.||n.a.||6,284||n.a.|
|MUNICH - Apartments|
|50 sq. m.||343,300||926||3.24%||6,866||18.52|
|120 sq. m.||974,160||2,076||2.56%||8,118||17.30|
Berlin: Charlottenburg, Friedrichshain, Grunewald, Karlhorst, Mitte, Prenzlauer Berg & Wilmersdorf
All apartments included in the survey were located in the upscale residential neighbourhoods of Berlin, Frankfurt and Munich.
Before deciding to buy property in Germany, make sure that you’ll be able to hold the property for some ten years because of the Abgeltungssteuer. The Abgeltungssteuer is a kind of capital gains tax which you’d have to pay if you sell your property within 10 years after buying it. This means that buying property in Munich to live in, only pays of if you have decided to make it your home over a longer period of time. For you as a foreigner there are no restrictions when it comes to buying property in Germany, but the fact that own property here doesn’t automatically makes you eligible to stay in Germany permanently.
The buying process is relatively straightforward. One generally needs a real estate agent (a list can be found on the Real Estate Agents' Union website), and their fees range from 3%-7%, and these are usually paid by the seller, but it is advisable to check.
Once a sale has been agreed, the contract is drawn up by a public notary (you are legally required to use a Notar to complete the sale of a property). The notary is impartial, and it his responsibility to ensure that all the paperwork and title are correct. The sales contract is then read out in full to both parties before signature. After signing, there is a government check to make sure that there are no outstanding issues. The sales tax of 3.5% is then due four weeks after signature. This is usually paid by the buyer. Many estate agents will assist buyers in finding suitable financing options and renting out the property, if required.
Some popular German real estate online portals (all of them only available in German language) are: immobilienscout24, immowelt.de and immobilo.de.
Below are the average prices in Munich for different kinds of property. The data comes from the Immobilienverband Deutschland IVD (German Association of Real Estate Consultants, Agents, Managers and Experts Southern Region) and show the situation in the last quarter of 2015.
Building ground for one-family houses: 1,700 €/m², ground for multi-storey building 2,220 €/m²
Flats/Apartments: existent 5,000 €/m², new 6700 €/m².
Detached house, existent, good neighbourhood: €1,230,000 per house.
Terraced house: existent 710,000 € per house, newly built €790,000 Euro per house.
Semi-detached house: existent 910,000 € per house, newly built 1,020,000 € per house.
Documents you should request to learn more about the property
It is simply not enough to see the place and knock on the walls. You have to take a look at bigger picture of your involvement in the place. You should ask the following minimum:
Wirtschaftspläne (Budget/Economic planning): This describes what has been decided by all the owners of the building financially speaking, giving also more details about the different expenses and their evolution in time. Look for the mention “Rücklage“, the reserve of money in the common budget of the property. Look also for “Hausgeld” which are the monthly expenses.
Teilungserklärung (Declaration of division): This document is showing what belongs to the apartment and what belongs to the joint-property like the stairs for example.
Energie Ausweis (Energy consumption assessment): Gives details about the energy efficiency of the property.
Grundriss: The lay-out of the property.
Advice and help in the process of buying property
Real Estate Agents
Agencies are almost necessary middle-men in the Munich market as direct transactions between private owners are rare. Real estate agents/agencies gather your requirements and help you find your property either by working with other agencies or using their first-party database. As anywhere else in the world, there should be no fees involved hiring an agency as they work on a performance basis.
Steuerberater - Tax Consultant
A tax consultant can help you find the best way to buying your property. They can often help you grasp a better picture of what the total cost of ownership could be. Many variables come into the deal so it could be a good idea to spend a bit of money on a tax consultant to potentially save thousands of euros in the future. It’s not a necessary to involve a tax consultant.
Anwalt - Lawyer
Lawyers are also not necessarily involved in the process of buying an apartment in Berlin either but they can be helpful to draft a sales contract or even pre-sales agreement one. Just as a tax consultant, they can also guide you through the different technicalities of owning and optimizing the costs of a flat. Some Steuerberaters have a lawyers’ practice they work with, or even have one internally. In addition to analysing the contract, they can also represent the buyer at the notary. This is often the case if the buyer is not living in Germany or does not speak German.
Notar – Notary
Notars in Germany don’t have an advisory role during the transaction. They stay neutral and are purely there to execute and make the transaction official. They also make sure that all documents are valid to put your name of the land register. Their fee depends on the value of the property.
Hausverwaltung - Property Management
While not directly involved in the process for people looking to buy an apartment in Munich, they are a valuable contact to have as they often provide all the documents to prospective buyers. In most cases, the agency representing the seller has gathered those documents for the buyer already.
The top residential areas in Munich are:
Some of the top residential areas in Munich are: Altstadt, Lehel, Maxvorstadt, Ludwigsvorstadt, Isarvorstadt, Herzogpark, Bogenhausen, Schwabing, Au, Haidhausen, Gärtnerplatz and Glockenbachviertel.
Sources: ivd-sued.de, abendzeitung-muenchen.de, settle-in-berlin.com, engelvoelkers.com, globalpropertyguide.com, economist.com