Should you trust forecasts about a decline in real estate prices in Germany? Is investing in German real estate for foreigners a reasonable step right now? When will real estate prices in Germany drop?

These questions are being asked by many Russians, Belarusians, Ukrainians, and other residents of the CIS, believing that the current global crisis triggered by the new coronavirus pandemic may have far-reaching consequences for the global real estate industry as a whole, and specifically for the German market. Let’s try to clarify these points.

Anti-crisis Investments in German Real Estate: Buy Insurance Against Recession

The German housing market was one of the few to avoid a downturn after the global financial crisis of 2008-2009. At that time, the following factors, still stimulating investment in German real estate, contributed to the positive outcome:

• Strict Mortgage Requirements: The caution of German banks prevented the crisis from engulfing the country, contributing to a rapid recovery in demand and creating a new boom in the real estate market.
• Low Appeal of Alternative Financial Instruments: Extremely low deposit interest rates and weak bond yields stimulated constantly growing demand and investment in German real estate.
• Foreigners’ Acceptance: Many German banks are very welcoming to foreigners and generally do not impede foreigners from obtaining mortgages. During the global financial crisis, this fact positively influenced the attractiveness of German real estate.

According to experts, the country will successfully overcome the 2020 crisis, and its real estate market will continue to develop rapidly due to the following measures and factors:

1. Low Mortality Rate: Methodical tracing of the new coronavirus transmission chains in the country has resulted in one of the lowest mortality rates in Europe.
2. Lockdown Easing: Germany was one of the first in Europe to approve a gradual resumption of economic activity after the lockdown, which had restricted the country to only essential services like food stores, pharmacies, banks, fuel stations, and other essential suppliers.
3. Economic Outlook: Given the European Central Bank (ECB) monetary easing policy, interest rates remain at record low levels, facilitating investments in German real estate with borrowed financing.
4. New Construction Shortage: New construction projects significantly lag behind the growing demand, increasing real estate prices in Germany.
5. Safety: Investments in real estate in Germany are considered relatively safe by specialists and simultaneously yield above-average returns.
6. Weakening Euro: The European Central Bank’s policy weakens the euro, making investments in German real estate even more attractive to individuals from outside the European Union.
7. Demographics: Demographic trends stimulate demand for high-quality residential real estate in Germany, while office real estate benefits from low unemployment and record employment levels, and commercial real estate gains from increased purchasing power and high consumer inclination.

Anti-crisis Investments in German Real Estate: Buy After a Virtual Tour

More and more German real estate agencies are adopting technology that allows transactions to be completed even if the buyer does not visit the property in person and makes investments in German real estate remotely. What benefits do virtual tours offer Russians, Ukrainians, and Belarusians looking to invest in German real estate?

• Interactivity Over Static: Virtual tours are interactive and provide a deeper understanding of the design, condition, and other parameters of the property compared to photos.
• Attention to Details: By taking a 3D tour before investing in German real estate, a potential buyer can visit each room, focusing on details like lighting fixtures or the view from windows.
• Open House 24/7/365: Virtual tours allow foreigners considering investments in German real estate to explore properties at their own convenience and pace, providing a sense of comfort and personal connection to the desired asset.
• Social Distancing: Remote viewing of the property via a laptop or smartphone or using virtual reality headsets can be done from the comfort of one’s home in Moscow, St. Petersburg, Kyiv, or Minsk, adhering to social distancing rules and avoiding long-distance travel to make investments in German real estate.

Anti-crisis Investments in German Real Estate: Process and Procedures

How can Russians, Ukrainians, Belarusians, or other CIS citizens invest in German real estate this year? The process can be structured as follows:

1. Finding a Property to Invest in: A potential buyer can start searching for real estate independently or with the help of a real estate agent. Note that the total cost of purchasing real estate increases by 3-6 percent due to agency fees.
2. Property Inspection: It is advisable to thoroughly examine the property and have it evaluated by an independent expert, who will also check the real estate in Germany for possible defects and encumbrances.
3. Buyer and Seller Agreement: Once the person planning to invest in German real estate finds a suitable property and resolves any ambiguities, they agree on the purchase price with the seller.
4. Notarial Duties and Responsibilities: Using notary services when purchasing real estate in Germany is mandatory. They perform legal tasks and oversee the contractual obligations related to the purchase, including drafting the sales contract. These specialists are also responsible for sending all documentation to the relevant authorities. Notaries typically charge a fee of 1.6–2% of the purchase price.

After the sale is complete, the title documents must be registered with the local land registry to transfer ownership to the new owner. This process may take up to 2-3 months.

If officials discover any unresolved issues with the real estate (such as existing encumbrances), they will prevent the transfer of ownership until the issues are resolved. This rarely occurs since notaries conduct appropriate checks before signing the sales contract to facilitate safe investments in German real estate.

Anti-crisis Investments in German Real Estate: The Contract

Among the most important parameters that should be reflected in the contract for investing in German real estate are:

• Ensuring that the names and addresses of the parties, as well as detailed information about the property in Germany, are accurately stated. This is crucial as errors, especially in details, can at least partially invalidate the contract.
• The agreed purchase price and payment terms.
• Provisions for what happens if either party fails to comply with the contract terms.

Parties have full freedom to choose payment terms. In most cases, the buyer needs to obtain mortgage financing to fulfill their obligations, which takes some time. Therefore, the seller agrees to register a priority notice (Auflassungsvormerkung) in the land registry, which protects the buyer from unexpected actions by the seller, including attempts to sell the asset to someone else at a higher price.

The actual transfer of ownership can only occur when the appropriate entry is made in the land registry, encumbrances from previous mortgages are cleared, and the tax office confirms that the seller has no outstanding real estate tax debts in Germany.

Other Considerations:

1. The equivalent of the purchase price is often first deposited into an account managed by the notary and transferred to the seller only after the entry of the transfer of ownership in the land registry is completed.
2. The notary is not responsible for the accuracy of the property description. This is the buyer’s responsibility when investing in German real estate.
3. The seller is not required to disclose serious defects that should be obvious to the buyer, but they must describe any hidden defects.
4. A copy of the most recent entries in the land registry can be obtained by application to the local court. However, only the property owner or notary has the legal right to submit this application.
5. The registry also lists the rights of any third parties, including, for example, tenants. Such tenants cannot prevent the sale of the property, but the new owner will be bound by any rental agreements the previous owner entered into. Consequently, the new owner cannot evict the tenant before the end of the lease term.

Anti-crisis Investments in German Real Estate: Expert Assistance

Investing in German real estate is a complex process, especially if the buyer does not speak German, is unfamiliar with the local market situation, and is distant from German legislation.

The process is further complicated by strict bureaucracy in Germany. Due to bureaucratic delays, transactions often take too much time, which is costly for both parties, as various fees and expenses need to be considered.

An expert can help overcome these challenges faced by many Russians, Ukrainians, and Belarusians making investments in German real estate. If you want to successfully navigate all the “pitfalls” and obvious problems, we recommend contacting our company.

Our Contacts:

INVESTMAKLER

expertise quality reliability
United Kingdom: E14 5NR, England, Canary Wharf, London, Level 18, Bank str. 40

Germany: 50 Mainzer Landstrasse, Frankfurt am Main

Hong Kong: Wan Chai, Gloucester Road 160, Overseas Trust Bank Building, 6th floor, office A13

Russia: 127055, Moscow, Novoslobodskaya st. 20, 3rd floor, office 33
+44 7477 654968 (Whatsapp, Telegram, Viber)
https://t.me/invest_makler (Telegram Channel)
info@investmakler.com
https://investmakler.com