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.