Germany: property taxes and major owner costs

Real estate acquisition costs

The cost of the object (Kaufpreis)

Experts of the German real estate market note that the cost of a residential property in Germany is fixed as in no other country in the world. However, a potential buyer does not lose anything if he sends a counteroffer (offer) to the seller through his broker.

With a high degree of probability, the owner of the property, especially the one that cannot be sold for a long time, will meet halfway and reduce the price. But it is worth remembering that bargaining is appropriate when buying secondary housing, when buying housing in a new building, the cost of the object is almost always fixed.

Commission to the real estate agent

Depending on the federal state, the amount of the agent's commission varies from 3 to 6% (+19% VAT). The exact value is the result of negotiations and can be paid by the buyer, seller or equally divided between the two parties.In principle, according to experts, all interest on the commission is a matter of agreement between the buyer and the intermediary.

Lawyer/notary fees

The notary is responsible for drafting the contract and ensures the legal transfer of ownership. He «protects » both sides of the transaction in the legal field of the transfer of rights. The drafted contract is sent to both the seller and the buyer, and is agreed between them. If one of the parties does not speak German, the contract must be translated into the native language by the translator. In Germany, a law has been adopted according to which the draft contract must be in the hands of both parties for two weeks, and only after the expiration of this period it is possible to set a date for reading the contract at a notary (however, there is no such condition for transactions with a legal entity). In turn, both the seller and the buyer have the right to make changes and additions to the contract. When both parties come to an agreement, the agent sets a date for a trilateral meeting (seller-buyer-notary). At this meeting, the notary must read aloud each clause of the contract and make sure that each of the parties clearly understands their essence. If the buyer or seller does not speak German, then it is impossible to do without the participation of a professional translator (at the same time, he does not necessarily have to be a juror). 

After signing the contract of sale by both parties, the notary sends a petition for making a preliminary entry in the Land Register (Grundbuch), which reserves the object for the buyer. After payment, the notary gives a second instruction to the participants of the transaction on the transfer of both ownership and ownership. For their work, the notary takes a fixed fee of up to 1.5% of the value of the property.

A real estate agent, as a rule, offers a notary, however, according to German law, the buyer can independently choose this specialist. And the seller, in turn, has the right to declare the unsuitability of the chosen representative. The purchase and sale transaction will enter the active phase only after the mutual choice of a notary by both parties, although in Germany this is not so important, since the procedure for all notary steps is prescribed by the regulations, and which specialist will carry out this work does not matter much.

Entry in the land registry (Grundbucheintragung)

This is a really important document when buying real estate in Germany, and the new owner must personally make sure that his name is entered in the land registry, and the names of the previous owners are deleted from the Land Register. The notary's duty is to send the buyer an extract from the Land Register, where the name of the new owner is entered, but the owner himself can receive an extract from the Land Register in the relevant office (Grundbuchamt) for a small amount.

If the purchase and sale transaction was carried out with the involvement of borrowed capital, the bank will also be entered in the book in case of bankruptcy of the borrower and the inability to repay mortgage payments. In this case, the name of the new owner will be entered first, the name of the bank will be the second in the book.

It costs about 0.5% of the value of the property, and the process of registration and transfer of ownership rights can take up to two to three months.

Transfer of ownership tax (Grunderwerbsteuer)

The transfer of ownership tax in Germany (analogous to stamp duty in the UK) is paid when buying land for future construction of a house, when buying an apartment for personal residence or when buying real estate for investment purposes – all land transactions are subject to payment by Grunderwerbsteuer. The land register keeps records of the size of the land plot. So, when buying an apartment, for example, 15/1000 of a land plot on which an apartment house stands is also purchased. Or a plot of land with a building located on it is being bought, and sometimes the type of structure is not specified at all. The tax is set by the state and paid once.

The amount of tax that will need to be paid depends on two things: the location of the property (the amount of tax depends on the federal land) and its value.

After the legal completion of the purchase and sale transaction, the German tax service will send a letter to the new owner informing about the amount of tax. In different federal states of Germany, this figure varies from 3.5% in Bavaria to 6.5% in the states of Brandenburg, Saarland, Schleswig-Holstein and North Rhine-Westphalia.

In Berlin, for example, the current tax rate is 6%.

Mortgage payment costs

Mortgage loans (Hypothek) are issued by most banks in Germany. There are no standard loan terms in the state, they depend on the capabilities and wishes of the borrower. The same applies to the choice of a floating or fixed interest rate.

To date, German banks issue loans for the purchase of housing at a rate of 1.5% per annum. For citizens of the country, the rates are from 0.75% per annum, but it is better for foreigners to focus on more expensive loans. It is worth taking into account the fact that those who receive a salary in Germany or those who already own real estate in the country have a better chance of approving a loan.

Repair

As in Russia, when buying a house in a new building, all costs can be either already included in the price, or lie on the shoulders of the buyer.Finished objects are rented with finishing or rough finishing, and the final configuration of the property often depends on the buyer. Buying a property that requires renovation may entail costs in the range of 100-1000 per 1 sq. m, depending on the imagination and wishes of the owner. Some types of reconstruction may require special permits. This mainly concerns work with load-bearing structures, as well as such serious architectural interventions as the superstructure of balconies, etc.

The approximate cost of one hour of work by professional apartment repair craftsmen ranges from €25 to €50. The following prices can serve as a price guide for furniture: a kitchen of individual sizes with appliances costs from €4600, and a fully furnished  furniture from chain stores living room  and the bedroom is – approximately in€7000-10 000.

Moving

All furniture stores in Germany deliver and assemble furniture. Some stores, especially for the delivery of small furniture, charge an additional €40-70.

In Berlin, to transport small household items or furniture from an IKEA store, you can use the Möbeltaxi service (literally "Furniture Taxi"), the cost of which starts from €29 per hour. For dimensional items or delivery in other cities of Germany, you can resort to the help of private operators, which can be found on eBay Kleinanzeigen. Usually, foreigners, students or international students who have a truck or van at their disposal and want to earn extra money work in private cargo companies. Their services are cheaper than the work of professional trucking companies, but this option may have its pitfalls, for example, fines for attracting illegal migrants to work.

Calculation of additional payments

So, when buying a property in Berlin worth €100 000, the associated costs will be:

• Agent's commission (7.14%) – €7000 (but maybe 3.57%, depends on the land)
• Notary (1.5%) – €1500
• The tax on the transfer of ownership (6%) – €6000 (but maybe 5% or 3.5%, also depends on the land).

In total , in the example given , the total purchase costs were€15 000, but on average it is necessary to focus on additional costs from 10 to 15% of the purchase amount. To this we must also add the costs of repairs, if they are necessary, and mortgage payments, but no one can guarantee the bank's approval of a loan to a foreigner. The automatic calculator can be found on the website Sparkasse.

Property ownership costs

Real Estate tax (Grundsteuer)

Although the real estate tax is calculated according to a complex formula, but in general its value is insignificant. On average, it is €2.50 per square meter of residential property, but a more accurate amount depends on the land and location of the city. The calculated annual tax can be paid by the owner of the property as a single payment once a year, or split the payment into quarters.

Since the contribution rates for the real estate tax are set individually in each land, the amounts of taxes at the regional level differ from each other. To calculate, it is necessary to know the estimated cost of the object (Einheitswert), multiply it by 0.35% (the basic federal rate) and multiply it by a coefficient individually approved for each federal land.

Utility bills

Payment of utility bills on average in the country is about €215 for an apartment of 85 sq. m. This includes payment for electricity, heating, water supply and garbage collection. In Berlin, this figure is slightly higher – about €225 per month, in Munich – on average about €240.

Management company

The services of the management company are paid separately from utility bills. So, the owner of an apartment in Berlin must pay for cleaning the building and the surrounding area, cleaning chimneys and elevator maintenance, gardening and paying for the services of the manager. On average, the amount is calculated at the rate of 0.63-1.0 per square meter per month.

Insurance

Insurance of a real estate object and the life of the owner are mandatory not only in the case of the purchase of housing with a mortgage, but also when buying any commercial real estate object.The amount of payment for real estate insurance depends on the type of insurance, the amount of insurance coverage and possible insured events. Standard insurance with a coverage amount of €335 400 will cost €137-200 per year. Accident life insurance will cost about €100 per year.

Other payments

Quite often, homeowners in Germany are required to pay for the maintenance of the street where the property is located. This is a normal practice, if an investor buys a house, then the length of the plot corresponding to the street becomes his concern: clean the sidewalk, sprinkle salt on the road in winter, etc. If in winter the homeowner has not cleared his part of snow or ice, and one of the passers-by fell and broke something, then he can address all the claims to the homeowner.

If the city decides to change the road surface, then part of the costs may also be shifted to homeowners or condominiums. Such plans are approved strongly in advance, and this is what the seller must inform the buyer about, it must be specified in the contract. Concealment of such facts is punishable by law.

Plus, a happy owner of real estate in Germany needs to remember about such little things as, for example, the TV tax is mandatory for every household and starts at 55 per year, but basically amounts to 55 per quarter.

HomesOverseas.ru  thanks Nadia Prince for her help in preparing the article (Prinz dom) and Oleg Belyaeva (Haus & Wohnung Baug GmbH).

_{photocredits: moyan brenn / dmitry kruglyak / flickr}

Olga Shoshina

HomesOverseas.ru