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PROPERTY

What to know about mortgages and fees when buying property in Germany

When buying a property in Germany there are a few key differences to other countries regarding mortgages and fees. We asked one expert to walk us through some of what you can expect - especially as a foreigner in Germany.

Property prices German
A row of houses in Munster, Germany. Photo: picture alliance/dpa/LBS West | LBS West

Interest rates might be up on the back of rising inflation, but prices in Germany are down by anywhere between 3 and 10 percent lately, depending on the area and type of property.

According to Peter Kleinwächter, an experienced mortgage broker and senior consultant with MLP Berlin, that may give certain types of buyers a chance to snag a place at a better price. Speaking on The Local’s Germany in Focus podcast, released February 3rd, Kleinwächter said that buyers are in a good position right now, especially if they negotiate directly with a developer.

But they’ll probably have to act quickly, as he expects interest rates to eventually come down and prices to go back up, especially with German governments missing housebuilding targets and a continuing shortage of affordable homes.

The true cost of buying a home in Germany is hidden at first though, with certain processes and fees being applicable that people from abroad may not be used to. In addition, non-citizens may have a harder time getting a mortgage.

READ ALSO: Ask an expert: Is now a good time to buy property in Germany?

Who can get a mortgage?

Legally speaking, there’s no rule on the books saying a non-citizen resident in Germany can’t get a mortgage.

In practice though, many banks will not lend to non-EU citizens who are resident in Germany on temporary visas – even the EU Blue Card for skilled workers. Someone who is an EU citizen typically has no issues with banks based on immigration status at least. In principle, all banks are also open to non-EU citizens who have permanent residency in Germany.

Some banks though, including Kleinwächter’s own, not only work with EU Blue Card holders in Germany, but specialise in those cases.

Houses in Leipzig

Houses in Leipzig, a current “trend city” in Germany. Photo: picture alliance/dpa | Jan Woitas

Kleinwächter’s advice is to not get discouraged if a bank turns you down and to shop around for one that’s familiar in dealing with foreigners. Many conventional banks may have people who speak English, but not to the necessary level. Others simply won’t understand how much the homebuying process in Germany may differ from back home.

“You need someone holding you hand during the whole process, not only the application process when finding the right bank, but also when it comes to applying for the loan because of all the paperwork,” says Kleinwächter.

READ ALSO: What experts say will happen to the German housing market in 2023

How much money do I need set aside?

Kleinwächter says the average deposit required for a mortgage has increased significantly in the last two years, going up around €30,000 to a current average of €150,000 for a typical German property.

Kleinwächter says once you have your deposit together, you can get a loan approval that you can bring with you to home viewings.

“That’s show that you’re serious,” he says.

Once you decide on a place, all German property transactions have to go through a notary, acting as neutral for both parties. Kleinwächter describes this as “when the money counter starts.”

Both buyer and seller will typically sit through a long appointment with the notary while he or she reads out the entire contract and makes sure everyone understands it. Internationals not fluent enough in German to discuss property law may be told to bring along an accredited interpreter. Depending on the length of the appointment, the interpreter’s bill could also run up to several hundred euros.

The notary themselves will set you back up to two percent of the purchase price, with the fee declining the higher the purchase price is and the lower the loan amount.

The fees don’t end there.

You may also have to pay a real estate agent fee – basically the agent’s commission – with the buyer and seller splitting it and shelling out up to 3.57 percent each.

However, there is one way to get by this fee, if you’re willing to buy a new place.

“If you buy something from a developer, you usually don’t have to pay any property agent fee because you’re buying directly from the producer,” says Kleinwächter.

Other types of property, like Kapitalanlagen – or buy-to-let investment properties – usually dispense with this commission, while other real estate agents may have a few commission-free properties on their portfolio to make them more attractive to buyers. 

The land transfer tax though, is not optional.

Paid by the buyer to the federal state government of where the property is located, the applicable federal state government will likely send you a letter soon after you sign the agreement, asking you to pay the tax within a short time. Amounts range from 3.5 percent of the purchase price in Bavaria to 6 percent in Berlin and 6.5 percent in Brandenburg.

Finally, once you take possession of the new property, you will get a letter from your district, asking you to pay a fee to be added to the land register (Grundbuch), proving your right to the property. That fee typically runs several hundred euros.

READ ALSO: EXPLAINED: What you need to know about buying property in Germany

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TRAVEL NEWS

Why are flights to and from Germany so expensive at the moment?

Air travel has ramped up again after the pandemic. But those travelling around Europe from German airports will notice there's been a surge in prices. Here's what's going on.

Why are flights to and from Germany so expensive at the moment?

If you’ve been trying to book a flight to or from Germany at the moment, you’ll notice that prices are much higher compared to previous years. 

But this trend is not limited to Germany – it’s happening across Europe and beyond. Since the pandemic, the cost of living has soared and flight tickets are not left out. 

In an interview with Germany’s Bild am Sonntag in May, TUI CEO Sebastian Ebel said the days of cheaper offers are largely over.

Ebel added that travellers’ booking habits, such as buying tickets shortly before departure, are likely to lead to a further rise in ticket prices. “Spontaneous bargains will be the absolute exception,” he said.

Meanwhile, Ryanair Austria head Andreas Gruber said back in September 2022 that there would “be no more €10 tickets” for flights. 

READ ALSO: Cancellations and compensations: How French strikes affect European flights

In an annual comparison put together by the portal idealo.de and reported on by German media, flight prices rose sharply in the aftermath of the pandemic. And booking prices for holidays in Germany are also above average. According to their research, holidaymakers had to pay up to 58 percent more for their flight to Greece, Majorca or Turkey in 2022 than in 2021.

And travellers are seeing further price increases this year. In March 2023, trips with return flights within Europe were on average 12.4 percent more expensive than in March 2019, reported German news magazine Spiegel.

From flights already booked, idealo.de also calculated the average price for the current period and upcoming summer.  

While a return flight to Greece still cost an average of €217 in May 2019, the price was around €341 in May 2023. Flights to Spain soared by about 60 percent, to Italy by 44 percent and to Croatia and Turkey by 48 percent.

Those planning a trip during the summer holidays also have to dig deeper into their pockets. A trip to Spain in the summer of 2023 is expected to cost 47 percent more than four years earlier. For Portugal, the price increase in August is 28 percent, for Turkey – 25 percent.

Rush to travel

Several factors contribute to these price hikes. The unexpected rush to travel after the pandemic caught the industry off guard and led to chaos at some European airports last summer due to staffing shortages.

Two travellers are standing in front of an information board at BER Airport.

Two travellers standing in front of an information board at Berlin Airport. Photo: Picture alliance/dpa | Paul Zinken

Despite the return of passengers, business travellers have not returned in the same numbers as before, partly due to the newfound convenience of virtual meetings. In addition, the slow recovery has impacted the profitability of specific flights, prompting some airlines to discontinue routes altogether.

Fuel costs, which account for approximately one-third of ticket prices, are often cited as a reason for the price increase, even though the price of oil per barrel is falling.

The International Air Transport Association (IATA) attributes the price hikes to the rising cost of kerosene, explaining that “high fuel prices, as well as other inflationary cost increases, can impact ticket prices if airlines are unable to absorb or avoid these costs.”

Meanwhile, Johan Lundgren, CEO of EasyJet, noted that the ban on flying over Russia has increased travel time by one to two hours for certain Asian destinations, adding to the costs of long-haul flights, according to airlines.

How can I avoid spending too much money on summer travel?

Although flights may not be as cheap as before, there are still strategies to keep costs down:

– Booking flights well in advance tends to result in cheaper tickets, as prices increase closer to the flight date. Therefore, if you still need to book your flight, now is the time to do so.

– Avoiding the peak holiday season in July and August can help save money. Instead, consider taking an early summer vacation in June or a later one in late August or early September.

– Check websites like Skyscanner and Google Flights for the cheapest airline options. These platforms can also find cheaper tickets if you’re open to making stopovers instead of flying direct.

Be flexible with your travel dates. For example, look for midweek departures or consider departing from secondary airports, which may offer lower prices compared to major airports.

– If you’re travelling within Europe, consider rail travel as an alternative to flying. The German rail system, operated mainly by state-owned company Deutsche Bahn, is known for its efficiency and relatively affordable prices and is highly regarded in many countries. Plus, using the €49 ticket within Germany can take you much of the way for next-to-nothing – and you can even reach a few foreign destinations using the monthly travel card. 

READ ALSO: Which foreign countries can you visit with Germany’s €49 ticket?

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