There was a really interesting article in the Financial Times a few weeks ago about buying property in Frankfurt. The basic idea was that for bankers leaving London there are plenty of bargains available in Frankfurt with benefits (nice neighbourhoods and an easy commute) which are unaffordable to the average buyer in London.
This is interesting because many people in Germany see Frankfurt as having a bit of a property bubble due to the steady influx of new residents meeting the demand of a very buoyant job market. Rental prices are increasing steadily, especially in the more desireable locations such as Nordend, but the price of buying property has remained relatively modest especially when compared to other major cities. An apartment of about 100sqm in a nice area and within 20 minutes commute of the centre is relatively easy to find for around €500,000. This sort of price is almost unheard of in central London. The main reason is that home ownership in Germany is still relatively uncommon. There has also been a long tradition of debt avoidance with many people preferring a rental contract to a long term mortgage.
As for buying houses instead of apartments, the FT helpfully showcased the top end of the market with a £12 million property, but the truth is that outside the city (30-45 minute commute) there are a few places listed for €5-600,000 and within the area are some nice big houses, some fully detached, for between €1-1.5 million. Again, this might seem unrealistic for most locals, but coming from London prices this is a relative bargain. There is a lot of talk about increasing numbers of buyers entering the market thanks to Brexit, but this is unlikely to really have a big impact until after the terms of Brexit are clear and people know whether there will actually be a surge in Brexit jobs. It could still be a couple of years away. In the meantime, price rises are being driven by the low or negative savings interest rates, as people look for somewhere to put their savings. Institutional investors are especially buying up the market for buy-to-let.
If you are actively considering buying property then there are some useful and comprehensive guides online from places like ‘HowtoGermany‘, ‘Streiflers‘ and ‘JustLanded‘. However here are a few key points to remember:
- it’s generally agreed that buying only makes sense for longer term residents or long-term buy-to-let. Long-term is about 5 years or more
- a key element of purchasing is that, by law, you must have your funding/mortgage irrevocably in place before beginning the purchase process
- in spite of all the useful websites out there, get an expert. Don’t get caught into signing an exclusivity agreement with an estate agent, but having a local expert who can handle all of the details in German can save you a lot of headaches and potentially costly mistakes
- it is unusual to be able to get a 100% mortgage and even if you do it will be a mixture of mortgage and insurances from different providers. Most normal mortgages will be about 60-70% so expect to have to put a decent amount of capital in yourself. Its worth checking out LoanLink who are a Frankfurt/Berlin based mortgage broker specialising in mortgages for international clients. They compare over 400 different lenders and can advise on all of the common mortgage questions
- additional fees for the notary, agent, tax, registration etc. can really add up. Expect between 10-12% extra on top of your purchase price
- not relevant for most people, but if you are thinking of moving or buying regularly, selling 3 properties within 5 years makes you a commercial seller liable for a 25% additional tax
For more information you should have a look at some of the articles mentioned above or definitely talk to an advisor like Barry King who specialises in property purchases and insurance in Frankfurt.
Where to search (housing and accommodation portals):
These are in no particular order but are a good place to start. They probably cover about 80% of the available market with a lot of overlap between them. Other properties will be available directly from local estate agents and quite a lot never even make it on to the open market. You just need a referral.