What are the costs of buying real estate in Germany?

Investing in real estate: key aspects

In this article, we will dive into the topic of real estate investment, highlighting all the possible costs a buyer may encounter along the way. Special attention will be paid to important aspects such as property values (kaufpreis), agent commissions, lawyers and notaries, as well as tax obligations and costs associated with owning a property.

House prices in Germany

According to real estate experts, house prices in Germany have a clear structure and are difficult to change, especially compared to other countries. Nevertheless, it is possible for potential buyers to negotiate the price with the seller through an intermediary.

If certain properties have been on the market for a long time without interest from buyers, the owner may reduce the price. However, it is important to keep in mind that this practice is usually applied in the case of secondary housing, while new buildings have fixed prices that are not negotiable.

Agent commissions

The amount of commission that real estate agents receive varies from region to region, as in different federal states it can range from 3 to 6% of the value of the property, to which 19% VAT is added. The amount of the commission is negotiated between the agent and the buyer and can be borne by one party or split between them.

As professionals emphasize, the final commission depends on trade negotiations and can change during discussions.

Services of lawyers and notaries

Paying a lawyer or notary is also a significant expense. The notary plays a key role in ensuring that all necessary documents are properly executed and that the transaction is legally finalized, which protects the interests of both parties.

He is responsible for drafting the contract, which is then agreed upon and provided to both buyer and seller. If one of the parties does not speak German, a translation of the contract into the native language is mandatory.

In Germany, there is a law that requires a draft contract to be provided to both parties two weeks before signing, allowing all terms and conditions to be agreed upon. Importantly, it is only after this deadline that an appointment can be made with a notary to finalize the deal.

The exception is transactions with legal entities, where such a rule is not necessary. Both parties have the opportunity to make changes to the text of the contract before its final approval.

Final meeting

When all the terms of the transaction are agreed upon, the real estate agent organizes a meeting between all parties involved - seller, buyer and notary to sign the necessary documents. This meeting is the final stage in the real estate acquisition process and formalizes the ownership of the property.

Expenses of property ownership

In addition, besides the primary costs of buying the property, the buyer must consider the additional costs associated with operating the property, such as:

• property tax(grundsteuer)
• utility bills
• management services
• insurance

These recurring expenses can significantly affect the overall financial plan, so accounting for them is an important element of investment analysis.

Conclusion

In conclusion, the process of buying real estate in Germany requires careful consideration of many nuances and additional costs. Knowing about each step and mandatory payments will make the process much easier and help you avoid unexpected costs.

Introduction to meeting with a notary

At the meeting with the notary, all the points of the contract must be discussed in detail. This is to ensure that all parties involved in the transaction are fully aware of its contents. If one of the parties, whether buyer or seller, does not speak German, a professional interpreter is required. This does not necessarily have to be a certified expert.

Contract signing and pre-registration

As soon as both parties have finalized the signature of the purchase agreement, the notary will make an application for a preliminary entry in the land register (grundbuch), which is necessary to reserve the property for the buyer. After the payment process is completed, the notary conducts the second stage for the parties to the transaction, concerning the transfer of ownership and possession.

Notary's remuneration

The notary's fee for his services is a fixed amount and may be up to1.5%of the value of the property being purchased. Usually the selling agent offers the services of a notary, but according to German law, the buyer has the right to choose a notary at his/her discretion. The seller, in turn, has the right to challenge the choice of notary if he or she considers the notary to be unsuitable.

Notary approval

The sale and purchase transaction comes into effect only after both parties agree on a notary, but in practice this does not significantly slow down the process, as the regulations of the notary are clearly spelled out, and the choice of a particular specialist is not decisive.

Entry in the land registry

The entry in the Land Registry (grundbucheintragung) is central to the process of acquiring real estate in Germany. The new owner must make sure that his or her name is correctly recorded in the land registry and that the names of previous owners are excluded. The notary is obliged to send an extract from the register which confirms the new owner, but the owner can also request such an extract from the appropriate authority (grundbuchamt) for a small fee.

Credit facilities and cadastral entry

• If the transaction is carried out with the attraction of credit funds, information about the bank is also recorded in the cadastre.
• This is in case the borrower runs into financial difficulties and is unable to repay the mortgage.
• In the document, the first entry is made about the new owner, then the name of the bank.

Registration costs and deadlines

The cost of registration in the cadastre is approx.0.5%of the total value of the real estate, and the entire process of transferring rights and registration may take from two to three months. Thus, the entire transaction process requires careful adherence to rules and regulations, which creates additional confidence for both buyer and seller, protecting their rights and interests in significant financial transactions.

Tax on the transfer of ownership rights

The tax associated with the transfer of ownership of real estate, called grunderwerbsteuer in Germany, is a compulsory payment that arises during the purchase of real estate. This tax charge corresponds to stamp duty in the UK. This tax is payable in a wide variety of cases, such as buying a plot of land to build a house, buying an apartment to live in or participating in real estate investment projects. This means that every land-related transaction requires the payment of grunderwerbsteuer.

Accounting of land plots

Each plot is accounted for in a special land register: for example, when buying an apartment, the new owner also receives a share in the land plot on which the apartment building is located, which can be, say, 15/1000 of the total space. It is also possible to purchase a land plot with an existing building, where sometimes information about the building may not be specified.

Amount of tax

The amount of this tax is regulated at the state level and is paid in a lump sum. The specific amount of the tax is determined by two main factors:

• The location of the property, as rates vary by federal region.
• The value of the real estate itself.

Upon completion of the sale transaction, the German tax office sends the new owner a notice of the amount of tax to be paid. The tax rate ranges from 3.5% in Bavaria to 6.5% in regions such as Brandenburg, Saarland, Schleswig-Holstein and North Rhine-Westphalia. In Berlin, for example, the rate is currently 6%.

Mortgage loans

Regarding mortgage loans, it should be noted that most banks in Germany offer home loans (hypothek). There are no fixed loan terms in the country: they depend entirely on the terms and preferences of the borrower, including the choice between floating and fixed interest rates. Currently, the rate on residential mortgages starts at 1.5% per annum. German citizens have more favorable rates starting at 0.75% p.a., while foreigners may find the terms less tempting.

It is worth emphasizing that loan approval is more often received by those who receive a salary in Germany, or owners of real estate located in the country.

Repair situation

As for repair issues, the situation in Germany is similar to that in Russia: in new buildings, finishing costs can either be included in the total price or be borne by the buyer. Finished apartments can be offered with both rough and finish, and the final look of the interior depends on the wishes of the new owner.

Repair expenses

For properties requiring major renovations, the cost can vary from €100 to €1000 per square meter, depending on the owner's ideas and preferences.

Introduction to renovation and relocation in Germany

First of all, it should be noted that the work discussed concerns load-bearing structures and complex architectural remodeling, such as the construction of balconies and similar structures. The remuneration of qualified specialists engaged in apartment renovation averages between €25 and €50 per hour.

Furniture costs

In terms of furniture costs, these guidelines can be emphasized:

• A custom designed kitchen with appliances can cost around €4600;
• Fully furnished living room and bedroom from mass merchandise stores are priced between €7000 and €10000.

Moving services

When organizing a move, it is important to keep in mind that all furniture retailers in Germany provide delivery and assembly services. However, some of them, especially when it comes to transporting small items, may charge a surcharge of €40-70.

In Berlin, if you need to transport small household items or furniture from stores such as Ikea, a service called a “furniture cab” (möbeltaxi) is available. Prices for such services start from €29 per hour.

For transportation of large items or deliveries to other German cities, it is better to turn to independent movers, which can be found on the eBay Kleinanzeigen platform. In most cases, these companies are represented by migrants, students or foreign students who have vans or trucks at their disposal and want to earn money.

Their rates are usually much lower than professional transportation services, but there are risks involved, such as possible fines for using illegal workers.

Additional expenses when purchasing real estate

Now let's turn our attention to the additional mandatory costs. For example, if you buy a €100,000 property in Berlin, you will face certain associated costs:

• The agent's commission, which ranges from 3.57% to 7.14%, will be around €7000;
• Notary services can cost 1.5%, which is another €1500;
• Transfer tax ranges from 3.5% to 6%, which adds another €6000 to the total.

Thus, the total additional costs in this example would be around €15,000, but on average it is recommended that a further 10-15% of the purchase price be set aside to cover additional sudden costs. These costs may also include the cost of repairs, if any, and mortgage payments. However, it is worth bearing in mind that there is no guarantee of loan approval from the bank for citizens of foreign countries. For ease of calculation, you can use the automatic calculator on the Sparkasse website.

Property taxes

When talking about the costs associated with owning real estate, one cannot fail to mention the property tax (Grundsteuer). This tax is calculated according to a rather complex formula, but, in general, its amount is insignificant. On average, it is about €2.50 per square meter of living space. The exact amount depends on the region and location within the city.

Thus,acquisition and maintenance of real estate in Germanywill require careful financial planning to account for all possible costs.

Choosing how to pay real estate tax

Owners of real estate in Germany can choose a convenient way to pay the annual tax: it can be a single payment during the year, or the amount can be divided into quarterly payments.

It is important to keep in mind that tax rates are set at the level of each federal state, resulting in significant differences in tax amounts from region to region. In order to calculate the tax accurately, it is necessary to:

• Determine the assessed value of the property (Einheitswert);
• Multiply it by the base federal rate, which is 0.35%;
• Multiply by the factor appropriate to the particular land.

Utility costs

In terms of utility bills, across the country, apartment owners spend on average around €215 per month for a home of 85 square meters. This amount includes the following services:

• Electricity;
• Heating;
• Water Supply;
• Garbage Removal.

In Berlin, utility costs are slightly higher at around €225 per month, while in Munich, apartment owners can expect to pay around €240 per month.

Services of management companies

Separate costs are associated with the fees of management companies that are not included in the utility bills. For example, an apartment owner in Berlin needs to cover the costs of:

• Cleaning of common areas;
• Chimney Cleaning;
• Elevator Maintenance;
• Green space maintenance.

Average costs for these services range from €0.63 to €1.0 per square meter of living space per month.

Real estate insurance

Insurance of both the real estate itself and the life of the owners is compulsory. This applies to both residential properties purchased with a loan and commercial buildings. The amount of insurance premiums may vary depending on:

• Like insurance;
• Level of insurance coverage;
• Potential instances where reimbursement may be required.

A standard policy with coverage from €335,400 can cost between €137 and €200 per year. It is also worth considering the cost of accident insurance, which costs around €100 per year.

Responsibilities of homeowners

Additionally, homeowners in Germany often have to pay the costs of maintaining the streets on which their property is located. This is a fairly common practice. When purchasing a country house, the investor becomes responsible for the maintenance of the area, including:

• Clearing sidewalks;
• Sprinkling roads with salt in the winter;
• Other activities to maintain order.

If the owner failed to clear snow or ice from the driveway during the winter and this resulted in injuries to passersby, he or she could be held liable for damages.

Replacing the road surface

If the city plans to replace the pavement, some of the costs may be borne by the homeowners and condominium owners. This is negotiated in advance, and the seller must notify the buyer of these plans - this clause must be written into the contract. Withholding this important information can lead to legal consequences.

Conclusion

In conclusion of this study, I want to emphasize how important all the steps and associated costs are when buying real estate in Germany. Buying real estate is a serious and responsible business that requires careful preparation and knowledge of many nuances. I have talked about the various cost items, including not only the cost of the property itself, but also agent commissions, notary and lawyer fees, as well as taxes and fees.

When buying real estate, you should not forget that every step of the transaction plays a role in ensuring the legality and transparency of the process. It is especially important to negotiate with real estate agents and be prepared to make a counter offer - this can significantly reduce the financial burden of the purchase. An equally significant part is the work of the notary, who ensures that the transaction is legal and that the interests of both parties are protected. I also mentioned that if both parties do not speak German, the involvement of a professional translator becomes essential to avoid misunderstandings.

Key points of the transaction

• Negotiations with agents- the opportunity to reduce the price when purchasing.
• ** "The role of a notary"- ensuring the legality of the transaction and protecting the interests of the parties.
• Registration in the land cadastre- a document confirming the rights of the new owner.

The key point is registration with the land cadastre, which secures the rights of the new owner and records all changes in ownership. This process may take some time, but it is necessary for the full legality of the transaction.

In general, buying real estate in Germany is not only a financial investment, but also a lot of legal procedures that require careful attention. Having on hand all the necessary information, I hope that future buyers of real estate will be able to avoid common mistakes and make their deal as profitable and safe as possible. The decision to buy a home should be made consciously, weighing the pros and cons to avoid unexpected costs and misunderstandings in the future.