Property investment in Germany has its own unique characteristics compared to other countries. Understanding the ownership structure, property market operations, and relevant policies can help investors make informed decisions. The article provides an in-depth look at how home ownership is managed in Germany, the functioning of its property market, and the considerations around foreign buyers. With rising housing prices in Berlin and other major cities, the government is exploring ways to keep housing affordable for long-term residents.
Full ownership of land and building is possible in Germany
In Germany, full ownership of both the building and the land is allowed. If you own an apartment, you also own a share of the land. For standalone houses, private ownership of the land is also possible. This differs from China where land ownership is mostly public. There are also long-term lease models but those are increasingly rare as Germans prefer full ownership. The owner has much freedom in using their property, though safety regulations exist.
Restrictions exist on raising rents but vacant homes are allowed
Germany has strong rent control policies that limit annual rent increases, making it difficult for landlords to evict tenants. However, leaving homes vacant is allowed. Activists occasionally occupy vacant buildings illegally which creates dilemmas for authorities in removing them without force. Overall, Germany faces housing shortages especially in major cities, partly due to limited land and slow permit approval.
Buying property as an investment has risks
For buyers living in the home, price gains after 2 years are taxed as income. For landlords, price gains even after 10 years face a capital gains tax first before income tax. Short term gains are unlikely, while medium term gains involve high taxes. Long term holdings over 10 years have fewer risks but laws protect tenants from eviction after sales. Overall real estate investment in Germany tends to have lower returns compared to other asset classes.
Foreign buyers are under consideration for restrictions
With rising rents and property prices, Berlin is considering restrictions on foreign buyers similar to New Zealand’s ban. EU rules likely prevent targeting European buyers, but other nationals especially from US, Israel and Russia are active. The ban aims to keep housing affordable for Berlin residents. But critics argue it ignores core issues like insufficient new construction. Speeding up permits and supporting development outside cities could help ease shortages.
Property investment in Germany has unique characteristics given its ownership models and regulations. While rising prices are attracting interest, taxes and tenant rules create risks. Proposed bans on foreign buyers highlight debates around keeping housing affordable.