House prices in Germany

Just bought a house here in Heidenheim (BW),was amazed with what i got for my money. Coming originally from Loughton in Essex, i guess that the house i just bought here would cost 3- 4 times more there, the way the house market in GB, is at the moment. Hopefully, the same will happen here!
It also was a lot easier than i expected.

Enjoy your house, but do not expect to make any money from it as an investment. You might possibly - but unlike in the UK do not expect any. Historically house price inflation in the Munich over the last 10 years has been I think around 10% which in real terms (adjusted for inflation) means prices have been going down.

For example - there is still PLENTY of available building land within 30-40 minutes commute of Munich, and population is of Munich only 1.3M and not rising fast - so very very different from London or Essex.

Heidenheim seems to be in no-mans land between Munich and Stuttgart so cannot see anything to drive prices up in your area.

House prices in Germany vary much according to the location - as in UK I guess.

You should probably not expect your house price to go up in currency (I avaoid the word value) mucvh...

I know Heidenheim - at least from the air when I go/come down there for
flying holidays. You are in the German centre of gliding paradise!!!

EDIT: snap!

Just bought a tiny little terraced house in Unterschleissheim (total living/storage space - 160sqm and a 40sqm garden) cost more than a 3 bed semi with decent garden in Londons commuter belt !! Don't see much Preisleistungsverhältnis in the housing market around Munich I have to say but better than paying rent.

Wild prediction of the morning: At some point the UK housing market will crash again, and it's much more likely to happen there than here. Ten years ago when I started work I was surrounded by colleagues with 20% negative equity on their properties because the market had done just that. It's a great paradox that high house price inflation in the UK makes the population feel rich when in reality it's the opposite, they're poor. The only way to be rich on the back of the UK property boom is to either own lots of properties, or sell your own home and buy again outside the UK.

As I plan to stay in Muc for the foreseeable future I'm buying a modest flat in Munich/Obergiesing which I'll nearly own in 10 years, all being well, and from that day on live almost rent/mortgage free. I don't expect huge capital gains from it, but it would be nice...

Actually, financially its probably better to pay rent than get a mortgage here in Munich. In the rest of the country, houses are cheap, but Munich is definitely the exception.

I'm speculating about selling my UK house and buying a property outright in Berlin. If I have my calculations correct, and neither the pound:euro ratio or the UK housing market crashes, I'm amazed to believe that I could buy a decent house on the outskirts of Berlin, and pay off my UK mortgage, and have some collateral to tide me over until I find work in Berlin.

Has anybody anything to burst this bubble of mine? Buying a German house in itself seems to be quite an undertaking, employing a notary and handing over way too much to an estate agent for examples. But am I crazy? Or should I take the opportunity to jump off the UK house market into a better standard of living in Germany before the house-of-cards market collapses in the UK (which, if you believe the Daily Mail , is any day now! )?

The only real negative to buying a house here is that if you decide to move at some point in the future you will sell the house for what you paid for it, in other words any investment mortgage payments ect will be lost. German houses are generally quite cheap, built to last and if you carefull cheaper than renting. Personally I would consider buying to let (rental properties) for the simple reason Germans are long term rentors, it's not unusual to see a family rent a place for 40-50 years. Odd considering there were heavy subsidies to buy a place.

A question for the buy to let experts. I have heard that living in a place (for say 1 or 2 years while working here), and then keeping it on as a rental property, can result in a bigger tax bill , than using it soley as a rental property from the outset. true?

Not really - you are selling something that's expensive and buying something cheaper. The pound is strong(ish) at the moment despite the recent strong fall so moving money is OK, interest rates are low, and if you want to live in Berlin for 10 years then why not? Ten years is the usual rule of thumb minimum to make the purchase and moving fees worthwhile but you never know, if the Mail is right you could sell your Berlin flat in the future and buy a princely residence in the UK after the crash...


Not really - the notary takes 1.5% which is a lot of money but then legal services are never cheap and if you get a good one they'll help by explaining the process to you - and best to find potential legal problems up front, eh? Some will just read the contract to you in an unintelligible blabber, but others are good. The one I used pointed out that the portion of the building's cash reserve that belongs to my flat is to be subtracted from the purchase price before calculating purchase tax, and to make sure this is taken into consideration when the tax authorities make their calculation, potentially saving us some cash. I'm not saying notaries are value for money but the service is useful and honestly life's too short to worry about what you can't change.

The agent (makler) is probably the bigger con, taking 3.57% both from buyer and seller often for sod all, but again the good ones are helpful and provide a useful service sourcing documents and explaining the process and PlanetHome were helpful. Not all properties are sold through agents but it's not the end of the world if your dream residence happens to be. Again contrary to popular rumour mortgage products are varied in Germany with quite some flexibility possible so get advice, and InterHyp gave good advice to me. If you're not sure of the state of the building then the TUV or Dekra offer to do an independent survey for ~400 euro, which takes about 2 weeks.

The whole process is pretty simple, although not immediately obvious, and a good grasp of German is very helpful.

True - and up North its more like 5 - 6.5% - from the buyer only

Go for it! I did it a couple of years ago. Sold a timy house in Brighton, and with the equity bought a lovely place with a nice big garden outright. Best thing I ever did... No more bad schools, bad health service etc... just a nice life

Berlin---buy, buy, buy, that's all I can say. Beautiful properties for dirt cheap, and I think Berlin is a special market, I wouldn't be surprised if house value goes up there more so than in Munich, for example.

Here in Munich, I just bought a nice, new apartment...but it's tiny, 50 meters squared, and it costs more than twice the price of the house my sister just bought in Utah with three bedrooms, two baths, patio, large yard, garage, laundry room... The other sister in San Diego says their prices are comparable to Munich -- but there, it's a bubble that will burst at some point.

I just find it an adjustment here. In the States, the rule of thumb is that if you buy and keep the property for at least two years, you will make a profit when selling.

That's not the case here, but I am sooo sick of having to deal with my landlord. If I am going to invest lots of money to renovate something, I want that something to be MINE!

I did have some comprehension issues, but I am guessing I would have had them if I had done these transactions in English, as well. But no worries, when there is something you are supposed to do, someone will let you know...

Not any more it ain't!

For those interested in learning a bit more about houses prices and illusions about costs and profit..then listen to Radio 4 tonight at 9.30 UK time. There is an excellent series which blows out many of the fallacies of investing in houses... The 2nd series in particular looks at the Economic issues: Houses as pensions, house prices and interest rates, housing costs (i.e. mortgage) and real inflation - and long term effects on debt.

The Price of Property

9:30pm - 9:58pm

BBC Radio 4

Evan Davis continues his exploration of Britain's housing. This edition looks at the growth in demand for property and explores the social consequences of housing shortages, from couples starting their families later to decreasing mobility in the labour market.

If you can catch the first two series as well.

Direct Link

Maybe from a financial aspect this could be true but if I wanted to rent a house like mine I would definitely be paying more for the rent than I do on the mortgage. And Germans will rent a house like this for years and years and years and I will own mine after 20 years.
It is just really nice to know that it's mine and I can do whatever I want to it and in it - and really, you can't put a price on that.

owning sucks big time. biggest mistake i ever made was to buy here instead of Britain.

Why?

I just wonder how estate agents (Makler) in Germany get away with charging nearly 4% of the purchase price to both the buyer and the seller. Do they even need qualifications or to be registered with the state to provide this "service"? I got talking to a makler at a wedding recently and between my deplorable German and his non existent English I got the impression that he just set up in business and that was that but that the percentage charged was a regulated by the government. maybe someone can clarify this?

I understand the want to have your own house, that is fine and I'll probably do the same thing one day. Financially though, its better to rent. You say your mortgage is cheaper than the rent on the place, however you no doubt had a deposit on the house, which if you didn't buy, could be invested and making money. So that profit could come off the rent you are paying too.

I've done the math a lot of times, and unless the house will go up in value you're better off renting in almost all cases.

The only thing I would say is one reason its cheaper up there is because the unemployment is high. If I had a steady job there, I would definitely buy but if I was moving to look for work, I wouldn't. Either way, Berlin has to be a better investment now than most of the UK where prices surely can't go much higher, so your idea might not be a bad one.

simple maths. I bought a flat here that has not appreciated one cent. Had i invested the same money in the UK i could have made about 100k. by now.

I can feel stanford'S fingers itching to type...

Not sure when you bought your flat OG, but the fact that the value hasn't increased much in the last 5 years (or even 15 years) is an indication that things have to change in the next decade taking into account the supposed upturn in the German economy. I believe Germany is one of the few western EU countries where property hasn't been the lucrative investment it has been in others. Plus, Munich being one of the more desireable cities to live in Germany (in terms of employment and location) things have to change... I live in hope I guess...

I also regret not buying in the UK 7 years ago when I was still living there. I definitely wouldn't buy anything now!

Sorry, Stanford, just seen you have already posted...

So to add regarding house vs renting debate. All forms of investment are bets on the future therefore buying a house has some of the following underlying factors implicit within it:

1. Same sized property: Rent prices vs Mortgage costs (inc. Houses Insurances and maintenance to the house).
2. Long term: Long term cost of renting vs long term mortgages. Inflation in renting sectors vs Interest rates
3. If you can rent lower than your mortgage and save the difference then the calculation is the financial increase of your house (equity) vs an alternative investments.
i.e. House Price Appreciation (house cost minus renting prices) vs. Shares (without debt repayment nor costs).
i.e House Price Appeciation (house cost minus renting prices) vs. Money in the bank earning interest.
4. If you can buy cheaper than renting then this is a non-brainer - buy a house.
5. Inflation/Interest Rates - low inflation and low interest rates make servicing a mortgage easier at the beginning but in the long term the burden will be harder as Wage Inflation will mean the financial burden does not get eaten into. Whilst the 70s was a hard time in terms of interest rates - it was a good time in terms of Wage Inflation as debts were medium to long term cheap - eaten into by inflation.
6. Foreclosure risk vs no foreclosure risk on an asset not bought with debt.
7. Relative tax benefits of each investment

So it shows that any form of investment is a bet on the future. There is no right or wrong answer just an implicit or explicit decision to take that bet.

BUT there is one thing that is certain - you need to be saving even if it is via house. As long as you have assets you have the chance of earning income or capital appreciation. No assets No Win.

Yeah but I was still itching to post again!!!

I agree if you were talking about Berlin or some other similar city where the house prices are currently low compared to elsewhere in Europe. However, Munich is super expensive already. If you want to buy a detached house in a public transport connected suburb, say, no further than 30 minutes out of town, you're looking at easily over 500,000€. 80sqm flat in town would cost you around 300,000€. That is not cheap.

And berlin has high unemployment/not many jobs!!! So as an investment area you are betting on Berlin solving is't unemployment problem AND more important becoming the city that they promised hope for in the 90s. Which in my humble opinion is just not going to happen...Berlin will never been a dominant and successful capital city like London or Paris.

Note: the UK house price vs earnings rate is now at approx 5.2 and stabilised. It reached 5 in 1989 then crashed to 3 for 6 years. Of course interest rates were higher then but then the sea of credit was not at the same huge level as now. The UK house market is finely balanced and awaits a crash, it's a classic bubble when people say "you cannot lose". But like all economics there is no real science behind it and prediction is impossible only guesses around previous experiences

Per Qm Cambridge is the same price as Haidhausen. France made the change to buying property in the 90's from 40% ownership to now 60%. Germans will do the same when they realise the state will not foot all the bills in old age. Munich prices will shift up as international buyers move in and the bonuses kick in when the economy moves (started now). The market in Munich is very bouyant now with fast turnover. This is a sign that prices will go up. Note also 40% of IT in Germany is in the local area. This has been subdued but signs are of a pick up. Buy in good areas not the middle of down trodden Munich (not close to somewhere reasonable) or close to good areas awaiting improvement. Buy where the gay community moves to, these always end up as trendy and on the up ie Glock' Viertel.

The UK property market still appears to be defying gravity. Interest rate rises have had a minimal effect. I thought it would peak back in 2005 but I was certainly wrong on that score. So now it is 2007 and the thing is still going up.


That statement is just plain wrong. If you have £200k profit/equity in your house that is as real as cash - the money is there, just tied up - but you can use it by remortgaging, and in fact it is a very important element in the funding of new businesses in the UK.

What happens now?

Buggered if I know, but whilst I think UK prices will slow down because wage rises cannot keep up with the house price rises, I don't think there will be a crash - just a slow glide back to some vague reality.

Why does this matter? If you are planning to return to the UK then this is an issue, otherwise stable prices are just fine if you're buying to live in a place. What difference does it make if you sell a place that has appreciated by 100K to buy another that's also appreciated 100K, or you sell one that hasn't changed and buy one that hasn't changed?

The high property prices in the UK mean when you step into buying property it is necessary to borrow much more money, and pay far more in interest, than here and that only benefits the banks. The high prices benefit the builders of new property, whose costs are still the same per house, much like high petrol prices benefit the oil companies (and the government) - the market value per unit is not related to the production cost. The rising market again benefits only those who own lots of property and can speculate in it, or sell up and move out of the country, or into a caravan. The only person for whom there are no benefits of either high or rising prices are the purchaser, apart from the entirely false feeling of wealth when the property rises in value. In fact, over the lifetime of a mortgage, volatility in either house prices or interest rates are never good for the purchaser who needs, above all else, the ability to plan for the future. Wherever there's a volatile market as sure as prices rocket up at some point they'll rocket down too.


Not really true, it depends how you define 'town'. You can certainly find very expensive flats of this size but look around and you can have this size with reasonable facilities for 200,000€. I just bought a good 90sqm flat in a decent, central area, with U-bahn, bus & tram connections for less than this, even after adding 50K€ euro of renovations.

Your maths about buying vs renting would be interesting. I calculate that in ten years my payments per month on the place that I live in could be less than 500€/month if I buy, but if I rent I will always pay 1000€+ as my needs grow, and considering the effect of increased expenditure when I have a family I see little chance for saving in parallel to paying rent.

To illustrate the point if, for the next ten years, I make special repayments against my mortgage of 6000€/year they will clear a debt that would be 85,000€ had I not made these repayments. Of course the first 6000€ payment would have had ten years to grow had I invested it so is 'worth' more than 6000€ after ten years but how much more? Invest this money as cash and you get bugger all in Germany, invest it in stocks and there's risk, pay it off against a mortgage and there's a certain, risk free, saving of 4.3% interest plus inflation which equates to a saving in interest payments for me of around 20,000€ after ten years, guaranteed. Still, whatever you do this shows the value of saving money, or using it wisely, rather than just spending it all on toys.

Naturally it is possible to find investments that have historically outperformed this rate but predicting the future is more tricky than looking at the past. Being of a naturally fairly conservative nature this security appeals to me, and I have made my choice.


You still can't have your cake and eat it. True the money is there while your property is 'worth' 200K whatever, but if you remortgage you then don't own part of your house, you simply have a debt that is secured against your property requiring interest payments none-the-less. And what happens if the market crashes? Again, this is simple - cash based equity creates wealth, debt costs money, however it is secured.

Predicting what the market will do at any given point is very difficult and many an expert has been made to look a prat by doing so, but the fact that a crash will come, albeit in an undefined timescale, is a racing certainty.

We decided to buy mainly because the rent we were paying is almost equal to the mortgage replayments we could get with minimal personal investment in a new house. Hopefully the house will go up in value but even if it doesnt at least we wont have to pay rent when we retire. That was the motivation for us anyway.

No, you don't simply have a debt that is secured. Having remortgaged you then physically have THE CASH in your hands that you can spend on financing a business etc. How many business loans in the UK do you think are secured against property...LOADS is the answer. You cannot just discount or ignore that wealth as not existing. It is real. As real as owning shares or any other asset, and possible more secure.

This is politician speak:



Without knowing if you are talking about a crash in 2 years, 10 years or 100 years the information here is non-information. As much use as a chocolate radiator. On the basis of that opinion do we buy property or sell it?

Johnny, stop being a muppet. The point I make, and made earlier in this thread, about the crash is simple - the stable German market is much less likely to crash than the historically boom/bust UK market. The next UK crash will come, just wait for it, and no I'm still not going to predict when it will happen.

But, what's this? You've borrowed money against your home and used it to fund a business? Great, good luck to you - just because lots of people do it doesn't make it good idea in all situations. Lose the money, or your business fails, and you lose your home. If the market crashes you cannot sell your home and pay the loan back so they'll come after everything you own. If the business works then you're all happy, and there's nothing like the risk of losing everything to focus the mind, is there?

There's no magic about 'remortgaging', it's just a bigger word than 'debt'. The bank will lend you some money, you'll have all that cash in your hands, but you still can't have your cake and eat it.

Nope. Never done that - never said I had done that.


You are telling us that the UK housing market is historically more volatile than the German housing market? Yippee - you get a Blue Peter Badge. However this nugget of information is of little or no use to anyone.

Are you therefore saying AVOID the UK market as it is more volatile, or are you saying GO for the UK market as it is the only one that historically has a chance of making you any money?

It might be worth noting that the tax regimes are quite different in various countries.

In Germany, real estate is Capital Gains Tax free after 10 years of ownership, whereas Shares are Capital Gains Tax free after only 1 year of ownership. In Australia your primary residence is Capital Gains Tax free, whereas all share sales are liable to CGT. In the US, interest payments on your residence are tax deductible. I am not sure what the situation is like in Britain though.

I am not sure exactly what effect this has on prices or volatility, but it certainly skews my investment decisions.

There is a girl I used to work with that kept moaning about house pricesin the UK being too high. She brought in a newspaper proclaiming an impending property market crash in the UK (The Daily Express) and proclaimed that she would be able to afford a house in the near future. That was around 5 years ago and I pointed out that the Daily Express had predicted the same for about 3 years, every year, previously. The point is that if you say something for long enough, it will eventually happen and you will be proven to have been correct (despite the fact, that in the case of the Daily Express, they have been saying the same for over 8 years now).

The government in the UK has berated the house builders for not building quickly enough but they retorted that they cannot employ enough labour to build quickly enough as there is not the skilled labour in the pool. Building land in the UK is in ever shortening supply, the population is increasing at a huge rate due to immigration and they all have to have somewhere to live. The economy is a "Goldilocks economy" (not too hot or too cold) and therefore people or fairly confident and will continue to pay ever increasing amounts for their desired choice of residence. The huge gains will come to an end at some point but that would be more of a levelling out than the free-fall that we saw in the early 90s.

JE is correct about people using the excess equity that they have in their houses to finance businesses, a lot of people do that, including my brother.

Bludger, as I understood it, if you live in your property in Germany (and do not rent it out) then the capital gains tax is waived after a shorter period than 10 years. I could be wrong but I can ask my tax bloke.

I don't think there is ANY tax on your primary residence in Germany, as most countries. In fact I cannot think of any country that taxes equity on your primary residence.

If anything the tax situation I think is slightly more beneficial to property investors in Germany. After 10 years of ownership any profits are tax free - in the UK you get hammered quite hard for CGT (there are some tax relief equations etc). Plus in Germany you can also devalue the physical cost of the building against your tax bill, which I find just plain weird.

Then again 0% tax on zero profit in Germany does not help much. In 2009 Germany brings in CGT at 25% which is better than the current regime of treating all profits as income.

That all said - I do think property inflation in Germany is lower than expected - and property inflation in the UK higher than expected. But what do you do?

The UK housing market is a special case because of many things but the main ones are, in simple terms:

1. There are too many people on one small island and most of them live south of Manchester.
2. UK planning laws are very strict which means that very little ever gets the go-ahead to be built. People would much rather see farmers get paid huge subsidies to keep fields green rather than use the land for something practical like housing, therefore Brits have to live in shoe box size houses that cost on average now over 200,000 GBP.
3. Schools in most cities are shit so parents that want to send their little darlings to better schools pay a premium for housing in that area. Other countries with less youth social problems do not have the factor.
4. Buy to let mortgages have very liberal lending criteria so a lot of people have stretched themselves to the limit to buy second properties, thus pushing up prices.
5. Social demography puts a greater demand on housing. There are more people in their 20s and 30s as single households and also there is a higher divorce rate, which again pushes up the demand for housing.
6. The housing booms of the 1980s and the early 2000s mean that most people now see housing as an asset in the same way as they see stocks and shares.

Oh and on the Berlin question...when property in Prague, Warsaw and Budapest costs more, it is obvious to me that the market is undervalued, regardless of the economic situation in Berlin.

http://www.moneyweek.com/file/3082/german-property.html

This is an interesting point. €uro interest rates are of course the same across Europe, but mortgages are much cheaper and easier to get in Spain and France. And in the UK relative to base interest rates mortgages are much cheaper (the banks make less profit). So easier mortgages will increase prices.

It is much less likely to crash because it already has. This link will lead you to a very detailed study published in Capital in August 05. It's in German but I think anyone should be able to read the tables.
http://frr.feri.de/UserFiles/File/frr/Pres...Capital0805.pdf
It shows that the average price for a house in Berlin was €479 800 in 1994 and in 2004 it was €292 300.
Other places did not do quite so badly, although some did even worse, but overall prices have collapsed all over Germany with only few exceptions. This does not even take inflation into account. I do not think that this market can be called stable by any stretch of the imagination.

There is the interesting challenge.

If you had £1M to invest in property over 10 years would you go for the UK or Germany? I think the UK may have a wee slow down/correction but you can't help thinking that over a 10 year run you might get a better return in the UK.

@ JE - depends what part of the UK.

If i had a million quid to invest in London or the South East where land is at a premium and property is an asset, then yeah I agree you would probably make more than investing in Germany. But I think that major German cities are better 10 year investments than e.g. Northern Ireland or northern English cities like Hull and Liverpool, where a lot of the house price rises seem to be fuelled by speculation and buy-to-let. Where close to 50% of the workforce work in one way or another for the public sector / civil service and there is no new investment by private companies into an area, I can't see why prices would continue to rise.

With the lower birth rates starting around 1970 now really affecting the property markets I do not see real estate to be a good investment anywhere in Europe.

According to this link you do not have to pay capital gains tax if the funds are used to buy some more real estate. I can't find anything in German on this yet though.

Then this will be a bit of shock to you. In Switzerland not only do the Kantons levy capital gains tax on primary residences but also on the rental value of owner-occupied properties. This means the cantonal tax authority estimates what the rental income would be if someone else were living it and adds that amount to your taxable income. Every Swiss Kanton does this.

It's an exception and you did not add that the rate of the capital gain tax decreases according to the years of ownership.

I'm not say it never works, but lets just take the example of where I live now.

I live in Neuhausen. I pay 800 euros cold per month for 80sqm. This is something I found on immoscout that is pretty similar to my place I guess, a little smaller but not much. It costs 280,000€, which will be 300,000€ after fees.

Lets say I have a deposit of 100,000€ euros, and that you get a loan for 200,000€ at 5%, which is a historically low interest rate and the only place its going from there is up. That means you're paying 10,000 euros a year in interest. But it doesn't stop there. You have your 100k invested in the house too, that could otherwise be earning pretty safely and comfortably 7% when invested in some funds. So really, you're losing out on 17,000€ per year. Thats 1416€ per month. Thats 616€ per month more than I am paying currently. Normally this would be ok because your house would go up in value and that would offset these losses, but it doesn't seem to happen like that in Germany.

This is the math as I see it. Sure, if you get a bargain maybe you can make it work financially, but I don't think this would be in the majority of cases. I'm also not having a go at people that want to buy a house, I can understand wanting to have something that is yours. I'm just talking purely financially.

If anyone out there can disprove my math, just let me know because I would be more than happy to find out that buying is actually cheaper than renting.

Que?