With the Brexit deadline looming, many Brits are relocating or buying their property abroad, making such European countries as Spain, Germany and France their home. In Germany, the standard is usually renting, but when Germans are making their dream of owning “my own four walls” (die eigenen vier Wände) a reality, then they expect to buy a property to live in for life. This is not unlike many of the Brits deciding to buy a property in Germany. German property has generally been a stable, reliable investment for local and overseas investors.

Brexit and the German property market

It’s not just Brits wanting to escape to Germany, but also international investors who are considering investing due to Brexit and the ensuing financial uncertainties. Buying property in Germany may be a great option, especially when the German economy is healthy and the property market is strong, with prices rising steadily. While Brexit might have deflated London’s real estate bubble, very low interest rates are pushing prices in Germany’s Munich and Frankfurt property markets. With prices rising steadily for years, there is greater risk of them falling unexpectedly.

Low interest rates

In Germany, low interest rates have helped increase real estate valuations. The European Central Bank’s loose monetary policy and low interest rates have benefitted owners of financial assets who have borrowed at very low costs to buy property or stocks in search for better returns.

According to a new report by analysts at Swiss bank UBS, Munich is at the greatest risk of a real estate bubble, while Frankfurt has seen prices rise by double-digit percentages. Frankfurt used to be "very cheap compared to London and other cities,” told CNN Business, one of the report's authors, Matthias Holzhey. While building activity in Frankfurt rose significantly in 2017, the rise in population led to an 80% increase in real price growth over the past decade, the report showed.

Germany as “safe haven”

Germany is a great European alternative to London’s traditional appeal, with Frankfurt and Berlin being particularly high in demand. Germany has a reputation as a “safe haven” making it attractive to buyers, with an increasing number of international investors from Asia, the Middle East and the United States.

In general, across Germany, rents and property prices are robust, but whether this is sustainable in the long run, remains to be seen. According to data released in 2018 by the Bundesbank properties in towns and cities could be overpriced by as much as 15-30%. As it was reported by the Bundesbank’s experts, there have been continuing price exaggerations in urban areas: “While price dynamics, from a macroeconomic perspective, were largely consistent with developments in the supply and demand-side variables, housing prices in towns and cities were still well above the level that appears justified by the longer-term economic and demographic determinants.” The economists estimated “upward price deviations for towns and cities at between 15% and 30%.”

However, buying a property in some places in Germany is affordable and should not deter Brits from making their decision to move there. Expatica noted that data from the German consumer organisation Stiftung Warentest in 2017 showed “that buyers in Magdeburg and Cottbus could buy a 130 square meter family home for €200,000, but that for the same money they’d get a small two-room apartment in Cologne or Dusseldorf, and only a dorm in Munich.”

Based on data from the third quarter of 2017, a house in Munich could be as high as €5,839 (apartment), €4,233 (family home), whereas in Cologne and Hanover €2,671-€2,257 (apartment), €2,240-€2,007 (family home), respectively.

Buying a property: costs

After doing your research in various property portals such as immobilienscout24 or immobilo, take your time to decide which property is most suitable for you and your family. When buying a home in Germany, you will be expected to pay 10% of the purchase price to cover the property transfer tax (3.5–6.5%); notary’s fees (1.2–1.5%); registration fees (0.8–1.2%); and estate agent’s fees (1.5–3%, plus 19% VAT).

One of the very important decisions you will also have to make is to choose an expert firm in foreign exchange who will help you with making regular transfers and protecting your funds from currency volatility. Universal Partners FX is a great option for anyone buying property abroad, as they are experts in helping expats like yourself move their hard-earned money abroad. Get in touch with their dedicated currency specialists and find out how much they can save you on your international money transfers.

Life after Brexit might seem uncertain, but for many Brits the decision to buy property in Spain is a certain fact. While there might be certain changes in terms of British citizens’ rights with perhaps more documentation and bureaucratic controls, the promise of a sunnier climate and a richer lifestyle is definitely a key factor when moving to Spain.

UK nationals living in the European Union

As the government notes, continuing to live and work in the EU after Brexit would be influenced by each country’s rules and regulations. If you are a resident in Spain, you should register as one, as well as register for healthcare. You should also check if your passport is still valid for travelling and exchange your UK driving licence for a Spanish one.

Buying property in Spain

Buying property can be a very hard decision and a very complicated process. But if you have done your research and sought out the right people to offer support and guidance, you will easily navigate all the complexities and be prepared for any unexpected changes. For one, getting legal advice from an independent lawyer who had good knowledge of Spanish land law (urbanismo), will help you when dealing with developers or estate agents. In this respect, you will be protected from fraud and you will safeguard your interests and finances. While you might be very excited buying or building your own home abroad, being careful with the individual agents and lawyers, and always looking after your own interests is very wise in order to avoid disappointment.

The same goes with the Spanish notary public who will offer legal advice, prepare the contract and issue the public deeds. You might prefer to work with a British estate agent but ensure that they are reliable and registered with the Law Society in the UK. If you are looking for a lawyer or translator the government’s website has qualified professionals on their website.

If you need more assistance with the language and communication, especially when signing a contract, you will need to get an independent translator by checking the Spanish Ministry for Foreign Affairs website.

Things to do before transferring money to purchase the property

Before you buy the property, make sure you check the land registry extract (nota simple), so you know that the sellers are the same with the registered owner(s) of the property and land. It will be wise to check that there are no debts or charges, including a mortgage or any legal proceedings against the particular property. Documents such as the planning permissions and the property itself should have all licences and permissions.

In any case, having the property surveyed by a chartered surveyor would be the best route when you want to have everything in order without worrying. When you purchase the property you will pay tax, so you should know the cadastral value of the property and how much purchase tax will be due.

Check important documents:

First, make sure that the previous owner paid the owner’s annual property tax (IBI), by seeing the receipt. The town hall should provide a certificate proving that there are no unpaid rates from previous years.

You will need to get the cadastral certificate (with boundaries and size of your plot) that must correspond to the Land Registry records. You will need a habitation certificate to connect the electricity and water companies, as well as a receipt to prove all utility bills have been paid. You might also need a certificate signed by the President of the Community of Property Owners stating that there are no outstanding debts.

From 1 June 2013, all homes for sale or to let in Spain need an energy efficiency certificate, so ensure that the seller has this certificate. Once you get all documents, you should register the property in your name with the Land Registry.

Transferring funds

When you have all the papers in order, you would start thinking about transferring your funds from a UK bank account to a Spanish account to pay for the property. Transferring large amounts of money can be stressful, so getting in touch with a reliable foreign exchange specialist such as Universal Partners FX will protect your funds and save you time and money. UPFX have many years of experience in the currency market and can provide the best tailored solution for your money. Get in touch with them today and find out how they can help you make the most of your money.