Berlin is one of the most interesting real estate markets in Europe right now. Germany’s capital still boasts attractive prices in sales. This city offers a unique urban & international environment. With high living standard, and plenty of parks and recreational areas, Berlin the right choice for living or looking into buying your apartment in Berlin.
As I started my investigations in the real estate market, i came across a few things that one should know when looking into that topic. I have gathered most important aspects to consider if you want to invest in the Berlin real estate market. It is mainly focused on apartments since i don’t have the means to buy a house, but most of this is still relevant for bigger properties.
DISCLAIMER : This is rather long piece so don’t be impressed. However, this is an introduction to a pretty big broad topic with many elements to consider so bear with me and make yourself another cup of tea. 🙂 You can also jump to the part that interests you the most by clicking on “show” in the table of contents here under.
- 1 – General considerations
- 2- What is important regarding taxes, fees and legal issues when one wants to buy an apartment in Berlin?
- 2b- What are the possibilities to obtain a credit with a local bank?
- 3- Which documents should i request from the owner to learn more about the property ?
- 4- Who are the different actors on the market and what are their roles ?
- 5- Typical process during a search
1 – General considerations
On the Berlin housing market, investors and residents’ demand has been steadily increasing over the past 10 years. The main explanations behind this are growth in both population and numbers of households due to the increased attractivity of the city. In addition, the economic performance is improving in the capital of Germany. Thus the purchasing power is increasing.
The purchases prices for an apartment in the center of Berlin are still “moderate” compared to London, Paris or New York. The positive expectations for the city and low interest rates make Berlin an attractive place for an investment.
While some parts of the cities like Prenzlauerberg or Kreuzberg has largely gentrificated and are more costly, many areas like Moabit or Neukölln are still interesting choices to consider. However, even in Prenzlauerberg or Kreuzberg, the price difference can play in your favor if you extend your search to just a few streets away.
Rental returns on new apartments in Berlin range between 2,5 and 3.5%* and estate agents are able to manage the property rental on your behalf. When buying an apartment in Berlin to rent out, it is important to know that any existing tenant agreement cannot be legally terminated to allow the owner to move in. In worst case it can be 10 years later considering the very protective laws towards tenant in Berlin. This is particularly important to know since Berlin is a market where most apartments are rented out.
The reason for that is simple : for many years with such low estate prices, there was simply no advantage to be a landlord and buy an apartment in Berlin. Even over the course of 20 years, it was better to be a simple tenant. This is now changing as more and more people are looking into buying their own home, but the offer for available apartments is often scarce. This could also represent an opportunity for negotiations and bargain a lower price. If you are not afraid of taking the issue to court or if you are patient, you can buy the apartment in Berlin for a cheaper price when there are tenants inside.
You don’t need a German address for any correspondence, as everything can be handled from home. Finding a flat in Berlin is relatively easy, it is best to start out browsing through Berlin property websites.
2- What is important regarding taxes, fees and legal issues when one wants to buy an apartment in Berlin?
A tax consultant is recommended to assist purchasers with any tax issues related to buying property in Berlin. Additional fees can be up to 15% of the purchase price as follows:
- Notary costs (Notar): 1-2%
- Land registry office fee (Grundbucheintrag): 0.5%
- Property transfer tax (Grundwerbsteuer): 6%
- Agents fees up to 3.57% (from 2021 on)
Take also good note that the German law has also taken steps to avoid speculation and fast increases in estate prices. A hefty tax has put into place onto the benefit made over reselling an estate if you don’t respect some conditions, literally removing that benefit. This means that under German law, in case you want to sell your apartment again, you need to have lived at least 2 consecutive years in the said apartment prior to the selling contract. Another alternative is to resell after 10 years if you don’t live in the flat your self.
There might also be some additional domestic regulations in your home country that you might want to check as well before you buy an apartment in Berlin. (I can’t help you there 😉 )
2b- What are the possibilities to obtain a credit with a local bank?
International buyers can obtain finance for up to 50% of the property value. Banks and other lenders may offer loans based on the equity available in another property. Many estate agents will assist buyers in finding suitable financing options and renting out the property, if required.
You can of course go to your domestic bank to see what’s possible but it is not guaranteed they will agree to a loan involving an estate abroad or/and there might be some translation to do for the bank to have a look at all the documents. Just get in touch, you might not know what comes out of it.
Another alternative could be one of the innovative platforms like Hypofriend, which brings much needed transparency for expats in that market. They help you to find the optimum mortgage for your case by letting banks and credit institutions compete to provide the best rate. They are also able to tell you very fast how much you can afford with your current situation, income etc… All of this 100% digital and with no strings attached. That’s a pretty clever way to go about this. Look at this as the next-generation finance advisor.
I have also covered more in details what factors are taken into account when requesting a mortgage with a German bank as a foreigner in this post.
3- Which documents should i request from the owner 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 (Ground view) : The lay-out of the property.
4- Who are the different actors on the market and what are their roles ?
Agencies are necessary middle-men in the Berlin market as direct transactions between private owners are quite rare. Again, the local culture & market conditions hasn’t led to a lot of small private owners but rather to several big-scale property management companies. Thus the culture to do deals between small private persons is not mainstream when it comes to buy an apartment in Berlin.
Agencies gather your requirements and help you find your dream apartment 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 system so, depending on your case, there are as little costs as possible owning or renting out the flat. They can often help you grasp you 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 in the future. It’s not a necessary to involve a tax consultant but it’s advised.
Anwalt / Lawyer
Lawyers are 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 Steuerberater have a lawyers’ practice they work with, or even have one internally. In addition to analyze 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. So a perfection option especially for investors as they have to come only once for selection the flat. The notary has to check if all parties involved understand the contract when he reads it in front of all parties involved. If a person who does not speak German wants to buy an apartment in Berlin without a lawyer an interpret has to be a the appointment at the notary.
Notar / Notary
In opposition to some countries, notaries in Germany don’t have a advisory role during the transaction. They stay neutral and are purely there to execute and make the transaction visible & official to the eye of the German state. They also make sure that all documents are valid to put your name of the land register. Their fee depend on the value of the property. Don’t expect to understand any of their administrative German while making their deed, it’s purely formal that they enunciate orally all elements of the transaction and the contract.
Hausverwaltung / Property Management
While not directly involved in the process for people who look to buy an apartment in Berlin, they are a valuable contact to have as they often provide all the documents to prospective buyers. Those documents give away important information about the property as we have seen. Most of the time however, the agency representing the seller has gathered those documents for the buyer already.
5- Typical process during a search
- Set your requirements and get real about your search/priorities
My first priority was always location-location-location when i wanted to buy an apartment in Berlin but you might feel differently. Try to get a sense of the market and know what’s reasonable to expect. Don’t hesitate to widen your net at first as it is by visiting many apartments that you will know which requirements should be considered with more flexibility.
- Create alerts on Immobilien Scout, Immonet & Immowelt to get the latest offers
We know those platforms from our search for a flat to rent, but those platforms are also the leaders for purchasing apartments. Sign-in for an account (on Immowelt, Immonet & on Immobilien Scout), set search agents to get alerts by emails as soon as a property matches your requirements. This way, you are sure to put a foot in the door early.
- Talk to a few agencies for guidance & reality check.
Agencies can be powerful allies when you pick the right ones, they help you to get through all the administrative stuff especially if you don’t speak German. They also represent the chance to be brought-in first (or at least early) when something new is being put out for sale, which is really important in the Berlin estate market. Just make sure to pick the right ones. I strongly recommend Invest-AB for 3 reasons :
They are former colleagues. They helped me get my apartment.They are a team composed of Germans and expats speaking French or English. You can really trust them, they work with foreigners on a regular basis.
- Go and visit interesting properties even if they don’t match your requirements exactly
This relates to my first point. This is really important because it will teach you the reality of the market and allow you to make a more qualified search. You also don’t want to dismiss a property that might have been “above par” after all. So go see a property that’s a bit further than that Ubahn Station. Go see that flat that looks like it’s been in a war zone. Go see that house that doesn’t have central heating. I can’t stress how important this is.
- Make sure your bank is aware of your wish to buy an apartment in Berlin
Once you have reached an agreement with the seller, it is important to go as fast as possible. You probably will have a bank lend you part of the money you need so make sure your contact person at the bank is aware of your search. Something i did for example is to send my bank an “alert” about a flat i was “about to buy” to rehearse the process with them and keep me in their top-of-mind. They then knew me as the guy who is about to buy an apartment in Berlin. I also listed in this article the options when it comes to loans in Germany.
- Check ALL parameters of the property (location, location, location but also…)
In my search to buy an apartment in Berlin, location was my first priority so i naturally had special eye for this when weighting my decision. However, try to push away the “sexy” parameters for a second and consider the other very important parameters. Space, location, orientation and lay-out are all important but make sure to check how the finances of the property looks like, how expensive the monthly expenses are, if there are any renovations already planned, etc. Those parameters can make the difference between a good deal and a bad one.
- Make your bid – fast, sort of…
If you are convinced you have found your dream property, be fast ! Others may be faster than you. Don’t rush it and ask all the necessary documents but be quick about making the decision. You might also want to use the service of a building surveyor too to check everything.
Have a professional estate agent as assistance to buy an apartment in Berlin
A professional agent takes the buyer through every step in the buying process and communicates with the seller and all partners involved. Its highly recommended to have a lawyer for consulting and to discuss details of the contract. Here again, i do strongly recommend Invest-AB when buying an apartment in Berlin.
tip 1 : look beyond what meets the eye and see the potential
A lot of people, even experimented ones, often dismiss an opportunity because they only look on the surface of things and don’t look at the actual potential of a place. A poorly equipped kitchen, a really dirty living room shouldn’t put you off. Look at the bigger picture and think about the potential you could uncover with a bit of work & time. Little gems can hide under gravels. 🙂
tip 2 : consider auctions
This option is often little known but several properties are being sold at auctions by the city. This could also represent a good opportunity to bid and make a bargain and buy an apartment in Berlin but involves a few risks. You are almost always not permitted to visit the place since it is an auction. The tenant or the owner is not obliged to let people see it so most of them just don’t, making this a wild card sometimes. You do have access to all regular documents though. Another issue is also how good you are at auctions; it can be tricky to bid in German. You also have be present physically and transfer 10% of the estimated value to enter the auction. All apartments for sale in Berlin are listed on this website.
Tip 3 : this post got quite popular so i decided to make one about how to approach the issue and sell an apartment in Berlin.