How to buy Real Estate in Germany
Things that foreign investors have to know - Part 1
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Intro (22.12.2017)
This is a series of know-how articles which were first published about 15 years ago, right at the start of the foreign investment boom in Germany. Many of our prospects emailed us and asked questions over questions on how to buy Real Estate Property in Germany. So at that time we made up a guide for private investors to follow.
With our new website (New Year 2018) we update some of the content but most of it is true as it ever was.
Only, this time we split this guide into five pages to make it's use more convenient.
What is the current market situation and what are the most attractive places for buying houses?
The demand of foreign investors has been remarkably increasing in the years 2011-2017 due to prices having hit their unsurmountable top in other parts of the world, and still being at an attractive level in Germany. Large companies and firms are buying property in Germany at multi-million volumes. On the smaller scale, the individual investors are looking for high yield offers at a range between 1 and 10 Million EUR investment sum. Yields between 7 and 10% are no longer expected, but a sound 4-5% is still sought-after, and event such returns are very seldom now attainable. Quality of the property offered plays a big role in this. And good quality high yield offers are not on the market at all right now.
Yields can be expected to range between 1.5 and 3% in Frankfurt (am Main) and top class areas nearby. Other areas still well connected to Frankfurt or it's International Airport may yield about 3-5%. Rarely more is being found unless walking off into further areas more than an hour away from the metropole.
In general, German economy is one of the world's strongest. The unemployment rate has come down under 3 Million and has been below 4% in 2017. It came down from 12.2 in 2006, which is indicating a remarkable improvement on the German economy.
But still that means that as investor one has to strictly concentrate on cities and areas which are most wanted for renting. But rents that were paid two or three years ago in many cases will not easily be obtained again. Those times seem history when many companies rented dozens of apartments to have them available for short-time staff or high-class apartments available for their directors and higher management level staffs.
Looking at specific cities, the most attractive and those with the highest rents are as ever: Frankfurt, Munich, Stuttgart, Duesseldorf, Hamburg, Koeln (Cologne). Those are the key metropolitan areas which will also keep their importance in the economical development. Berlin now has to be added to the list too but needs careful research as to the area of investment. (Compare our article Location Location Location).
On the other side, Cities like Frankfurt, Munich, Stuttgart and the others named are pretty stable in rent, especially in the very good city areas. In Frankfurt many hundreds if not several thousand new apartments have already come on the market in new development areas since 2007 (in the 2007 version of this article we talked about extreme shortage on rental flats). That means the market is offering much much more and not with much higher rents; in fact in some older areas rents had to come down so as to stay below the newly built ones where one can be first lessee.
If we are asked for a current recommendation on where to buy, we can say: in Frankfurt in the good old traditional areas (Bornheim, Bockenheim, Sachsenhausen north, any river side, Westend, Nordend) you can buy safely. New developments like Riedberg (University Campus area) and Europaviertel (European quarter) are much sought-after for rent also.
Outside of Frankfurt the best expanding and developing areas are Bad Vilbel (since another branch of the European School was opened there) and the southern Trio Neu-Isenburg, Dreieich and Langen.
Read part two and the rest of this series by following the links below. Use the Feedback form (at the end of each webpage) to send us your questions or feedback.
How to buy Real Estate in Germany Part 1: The current property market situation (this page)
How to buy Real Estate in Germany Part 2: Market view by Real Estate category
How to buy Real Estate in Germany Part 3: Steps to take when buying
How to buy Real Estate in Germany Part 4: Financing Real Estate in Germany
How to buy Real Estate in Germany Part 5: Frequently asked Questions