For the past decade, the German real estate market has been undergoing a phase of total restructuring and internationalization. This process has intensified during the last five years, with the economic crisis leading to a flow of capital not only from traditional investors in the Scandinavian countries but also from the European South for investments in the German commercial and residential real estate market.
Cities such as Berlin, Leipzig, Munich and Bremen became and remain the focal point of interest of foreign investors who in the German real estate market are primarily looking for security and stability, and secondarily high returns.
AP & Generalis specializes in meeting the increasingly complex needs of foreign investors in a market perhaps unfamiliar to them, meaning they require not only legal and practical advice but also realistic support in selecting the right property and later in matters relating to the management of real estate acquired.
With this in mind, AP & Generalis from the outset approaches the issue of acquiring real estate in Germany from an overall perspective, informing each investor about the particularities of the German property market, undertaking and expediting the entire purchase from the initial stages (opening an account with a German bank, choosing the most suitable real estate broker), during the process (preliminary checks, coordination of the technical inspection, assessment of tax liabilities, preliminary purchase agreement, drafting of the contract in cooperation with a notarial office) and dealing with any other matters that may arise after purchase (management, leasing, resale, tax declaration, succession planning and administration, etc.).
To achieve optimum results, we work closely with specialists who understand the specific issues facing foreign investors in Germany and are therefore in a position to offer tailor-made services. In particular, we cooperate with:
Matters pertaining to property management which may be straightforward for German residents can often cause difficulties for owners living outside Germany. Even in cases where foreign owners assign the management of their property to German companies, problems frequently arise on account of owners’ unfamiliarity with the system and the fact that many German management companies have only a limited command of English.
AP & Generalis continues to support clients after the purchase of real estate with a full range of services, by either directly undertaking or overseeing the management of:
For investors and businesses in non-EU countries, the incorporation of a partnership or company with capital in Germany opens a direct and effective gateway to not only the German but also the Europe-wide market.
AP & Generalis specializes in company incorporation in Germany, particularly on behalf of investors and businesses in non-EU countries but also other European countries, providing:
The first contact most companies have with the German market is when they distribute and sell their products in the country, either through commercial agents or directly via online portals. In all these cases, exporters seek practical, overall solutions to safeguard their interests in the German market. AP & Generalis provides effective safeguards via the program Germany Trade with:
Specialist legal advice for exports
Credit checking of counterparties in Germany
General guidelines for conducting business in Germany
Ensuring the collectability of accounts receivable in Germany
Legal advice regarding the most suitable company form for conducting commercial activities in Germany
For the past decade, the German real estate market has been undergoing a phase of total restructuring and internationalization. This process has intensified during the last five years, with the economic crisis leading to a flow of capital not only from traditional investors in the Scandinavian countries but also from the European South for investments in the German commercial and residential real estate market.
Cities such as Berlin, Leipzig, Munich and Bremen became and remain the focal point of interest of foreign investors who in the German real estate market are primarily looking for security and stability, and secondarily high returns.
AP & Generalis specializes in meeting the increasingly complex needs of foreign investors in a market perhaps unfamiliar to them, meaning they require not only legal and practical advice but also realistic support in selecting the right property and later in matters relating to the management of real estate acquired.
With this in mind, AP & Generalis from the outset approaches the issue of acquiring real estate in Germany from an overall perspective, informing each investor about the particularities of the German property market, undertaking and expediting the entire purchase from the initial stages (opening an account with a German bank, choosing the most suitable real estate broker), during the process (preliminary checks, coordination of the technical inspection, assessment of tax liabilities, preliminary purchase agreement, drafting of the contract in cooperation with a notarial office) and dealing with any other matters that may arise after purchase (management, leasing, resale, tax declaration, succession planning and administration, etc.).
To achieve optimum results, we work closely with specialists who understand the specific issues facing foreign investors in Germany and are therefore in a position to offer tailor-made services. In particular, we cooperate with:
There are five important factors that need to be considered when buying property in Berlin:
East or West Berlin, a central district or a leafy suburb? An established area such as Prenzlauer Berg, Friedrichshain, Charlottenburg and Wilmersdorf, or an upcoming locality like Wedding and Νeu Köln? What should I be looking for in terms of infrastructure, population growth and composition? Do I want a property in a tourist area, or would I prefer somewhere quieter? Questions such as these illustrate just how difficult it is to choose the right property, particularly when it is not intended as a permanent residence but rather an investment or second home. As lawyers who provide advice to foreign investors on their real estate purchases not only in Berlin but throughout Germany, we understand that our advisory role begins with the choice of property and because we love Berlin, we are more than happy to assist prospective investors at this initial stage by offering an independent, objective opinion about the property and its location, thereby helping them to make the right choice from the outset.
In a city such as Berlin, which attracts buyers from all over the world, the only property prices that would appear to be bargains are those which were being offered several years ago. In other words, the margin for price negotiation in a seller’s market is very slim. The only way for buyers to gain negotiating leverage is by arranging a proper inspection of the property in order to identify possible drawbacks. Such an inspection should consider the following factors:
We consider it imperative to carry out a thorough check of all property both from a legal perspective and overall, not only to secure negotiating leverage but above all because we believe that the best decisions are made on the basis of a combination of subjective impressions (e.g. a prospective buyer’s personal feeling about the property and area) and objective facts that lend weight to the former.
3.1 The area
Location, location, location: It is generally accepted that one of the most important criteria when buying a property is the precise location in the most suitable area. In most German cities however, Berlin in particular, the various districts and their respective ratings are in a constant state of flux. Moreover, in each district there are smaller neighborhoods with particular characteristics of which prospective investors should be aware. So, the first thing we discuss with buyers is whether the property is on the right street in the right location, and whether that neighborhood is the most desirable. Positive factors in assessing an area’s attractiveness include:
Quiet: One of the top priorities for German buyers is for a property not to be exposed to noise. Ideally it should be on a quiet road or – if located on a busy street – removed as far as possible from the primary source of any noise.
Greenery and playgrounds: It is obviously an advantage if there are green spaces and playgrounds in the area.
Schools: Where placement in state schools is decided on the basis of place of residence, areas with reputable public schools are clearly more attractive.
3.2 The building
Altbau: Germans have something of an obsession with this category of old buildings, seen by locals and foreigners alike as highly desirable residences, most of which underwent extensive renovation in the 1990s. Drawbacks include higher maintenance costs and the fact they cannot reach the same energy performance levels of newly constructed buildings.
New builds: These apartments are generally characterized by quality construction with an emphasis on good insulation and low energy consumption. Common expenses, the biggest component of which is heating costs, are usually low. If the apartment is to be rented out, low common expenses can offer a significant advantage, since lessees are interested in the total cost involved, i.e. rent plus common expenses.
50s to 90s: In most cases, these apartments have low ceilings but a functional layout and low maintenance costs.
Balcony – terrace: A balcony or other space for exclusive use is a big advantage, though it does count toward floor area. So, for example, in the case of an apartment with a floor area of 100 m2 and a balcony of 10 m2, 50% of the balcony counts toward the total floor area of the apartment (= 105 m2).
Roof: Having exclusive use of a flat roof, or even access to it, is considered an advantage.
Ground floor: It is not unusual for ground floor apartments to have their own garden. Although this may be considered desirable, in some cases it may increase the risk of damp.
Position: On small, quiet roads or in squares, an apartment’s position right on the street is generally regarded as an advantage. On busy streets, however, most buyers prefer apartments set further back from the street or on a higher floor.
Elevator: Generally speaking, elevators are only found in more recently constructed buildings (from 1990 onwards). Consequently, the lack of an elevator is not considered a particularly important disadvantage compared to other countries. Nevertheless, the availability of an elevator is certainly an asset.
Parking: Having access to a private parking space, especially in central districts, is considered to be increasingly important.
On account of the high international demand for property in Germany and Berlin in particular, prospective buyers should exercise caution but act without delay. Buyers of property in Berlin visit the city one to three times on average before making the final purchase. The cost of these visits is not insignificant, so they are advised to work with reputable real estate agents who can facilitate the process by arranging to show them more than one property during a single visit.
When do I pay?
Unless the use of an escrow account has been agreed, in which case the total cost is first paid into that account.
How much time will it take?
When purchasing property in Germany, the total additional costs amount to 13-15% of the purchase price (depending on the city). In Berlin, costs amount to 14.64 % + expenses for appointing a lawyer.
5.1 Real estate transfer tax
| City | % | City | % |
| Berlin | 6 | Munich | 3.5 |
| Potsdam | 5 | Frankfurt | 6 |
| Dresden | 3.5 | Stuttgart | 5 |
| Leipzig | 3.5 | Bremen | 5 |
| Rostock | 5 | Hamburg | 4.5 |
5.2 Notary public
About 1.5%
5.3 Real estate agent
From 3.5% to 7.14%. In most German cities, real estate agents are paid by the buyer of the property. Most often, the fee is 6% + VAT = 7.14%. If the fee is lower, the agent usually receives an additional payment from the seller of the property.
5.4 Tax benefits
Private individuals who are purchasing property that is leased out or is to be rented out in the future are strongly advised to consult a tax professional at the start of the process and be aware that:
Matters pertaining to property management which may be straightforward for German residents can often cause difficulties for owners living outside Germany. Even in cases where foreign owners assign the management of their property to German companies, problems frequently arise on account of owners’ unfamiliarity with the system and the fact that many German management companies have only a limited command of English.
AP & Generalis continues to support clients after the purchase of real estate with a full range of services, by either directly undertaking or overseeing the management of:
For investors and businesses in non-EU countries, the incorporation of a partnership or company with capital in Germany opens a direct and effective gateway to not only the German but also the Europe-wide market.
AP & Generalis specializes in company incorporation in Germany, particularly on behalf of investors and businesses in non-EU countries but also other European countries, providing:
The first contact most companies have with the German market is when they distribute and sell their products in the country, either through commercial agents or directly via online portals. In all these cases, exporters seek practical, overall solutions to safeguard their interests in the German market. AP & Generalis provides effective safeguards via the program Germany Trade with:
