Investment in Germany

P

phoenix_n

Guest
Guten Morgen.

Beginning to research German property and had the following questions:

Q1
If you are buying an investment property in Germany do you have to get a German mortgage ? Read some threads and this seems so but i always thought you could just get an Irish Mortgage.

Q2
Anyone done any research on german property. Looking at one building in Hamburg, includes 4 apartments (60 sq metres each) and one studio. City centre location. (local knowledge of area so no problem with area)

Price 430,000 (+ approx 8% transaction costs), rental 2400 a month. Am aware of double tax etc. Gonna do some number crunching but has anyone here looked at german properties and return i should be looking for....

cheers...
 
If you have equity in Ireland then you can get an equity release mortgage in Ireland to pay for the foreign property.

Are you aware that tenants have very strong tenancy rights in Germany? You should consider this as part of your research.
 
Before buying property abroad one should check the market situation there. Here are the numbers for various European countrys showing the numbers of new houses build per 1,000 capita during the last year:

Irland je 1000 Einwohner 18,6 neue Häuser
Spanien " " " 15
Norwegen " " " 6,3
Finnland " " " 6,1
Frankreich " " " 5,9
Portugal " " " 5,3
Österreich " " " 5,2
Schweiz " " " 5,0
Dänemark " " " 4,8
Belgien " " " 4,4
Italien " " " 4,4
Niederlande " " " 4,3
Schweden " " " 3,8
Ungarn " " " 3,8
Großbritannien " " " 3,2
Tschechien " " " 3,2
Polen " " " 3,0
Slowakei " " " 2,8
Deutschland " " " 2,7

Source: Magazine "Hausbau 7/8 2006" published by Fachschriften Verlag GmbH, 70731 Fellbach.

Germany is the market with the smallest demand for property in Europe. I would say during the last 15 years more houses have been demolished then build over there. Germany has the highest rate of emigration since the WWII. More then 100,000 people left for good last year.
My question to the so called investors: Why going into a dead market?
Half of all construction jobs in Germany have been lost in the last 10 jears.
From 1 Million jobs ten years ago down to 500,000 today. De facto there is no demand for property.
Don't get fooled by so called advisors with a clear agenda.
Gute Nacht!
 
heinbloed what do you think of latest offering on [broken link removed]
med centre in berlin
as for buying appt too much bother for me........would sooner go for commercial syndicate with non-recourse leverage and hands-off approach.
 
Understand what you are saying but if you calculate say a return of 6% on purchasing property in Hamburg with the capital not in risk of devaluing against under 3% here and a risk of devaluing it can make sense to look at a property in say Hamburg. If you can buy 4/5 apartments for the price of 1 here it is worth investigating.



heinbloed said:
Before buying property abroad one should check the market situation there. Here are the numbers for various European countrys showing the numbers of new houses build per 1,000 capita during the last year:

Irland je 1000 Einwohner 18,6 neue Häuser
Spanien " " " 15
Norwegen " " " 6,3
Finnland " " " 6,1
Frankreich " " " 5,9
Portugal " " " 5,3
Österreich " " " 5,2
Schweiz " " " 5,0
Dänemark " " " 4,8
Belgien " " " 4,4
Italien " " " 4,4
Niederlande " " " 4,3
Schweden " " " 3,8
Ungarn " " " 3,8
Großbritannien " " " 3,2
Tschechien " " " 3,2
Polen " " " 3,0
Slowakei " " " 2,8
Deutschland " " " 2,7

Source: Magazine "Hausbau 7/8 2006" published by Fachschriften Verlag GmbH, 70731 Fellbach.

Germany is the market with the smallest demand for property in Europe. I would say during the last 15 years more houses have been demolished then build over there. Germany has the highest rate of emigration since the WWII. More then 100,000 people left for good last year.
My question to the so called investors: Why going into a dead market?
Half of all construction jobs in Germany have been lost in the last 10 jears.
From 1 Million jobs ten years ago down to 500,000 today. De facto there is no demand for property.
Don't get fooled by so called advisors with a clear agenda.
Gute Nacht!
Click to expand...
 
phoenix_n said:
Understand what you are saying but if you calculate say a return of 6% on purchasing property in Hamburg with the capital not in risk of devaluing against under 3% here and a risk of devaluing it can make sense to look at a property in say Hamburg. If you can buy 4/5 apartments for the price of 1 here it is worth investigating.
Click to expand...

Agreed. It's all about the yield.
And buying when others are fearful. Most property 'investors' in Ireland are really speculators - looking for the rise in property prices. Long term investment in the rental sector in the largest exporter in the world makes sense to some. What also makes sense to some is investing in a country that actually creates and trades in something, rather than say, trading houses to each other :)
 
shnaek said:
Agreed. It's all about the yield.
And buying when others are fearful. Most property 'investors' in Ireland are really speculators - looking for the rise in property prices. Long term investment in the rental sector in the largest exporter in the world makes sense to some. What also makes sense to some is investing in a country that actually creates and trades in something, rather than say, trading houses to each other :)
Click to expand...

My mate from Hamburg was over and could see the booming economy here. I could not tell him where the money was coming from beside the building boom. When I told him that i have a booking deposit on a new city centre apartment for 430 he was taken aback. Granted there is alot of tax implications in buying in germany but he showed me a building with 4 apartments and 1 studio for 430.

For a long term investment and a steady annual return Hamburg looks the obvious choice.

"What the wise man does at the beginning, the fool does at the end"
-> now i just got to figure out which one i am ? :)
 
To markowitzman:
I can't give you advise on a speculation matter. Only to be carefull when investing in a thing that one doesn't understand. The German health system is in the brink of collaps, lack of money. Public coffers are empty and more and more people need medical help. Due to to unemployement and a shrinking population and a population that is getting older. Health insurance is payed by the working people. And they are getting less.
The hospital doctors are on sporadical strike since January . Because they have to work 70-80 hours per week. Without payment for overtime. This has to corrected, so there would be less money for other parts of the health system like hospitals, treatment, medication. The German economy has been exploited by the idlers too long, the udder is empty. And they're still forking out for Irish sewage treatment plants....
 
Heinbloed thanks for this.
Would be attracted to healthcare with downturn and ageing population etc
With german yields and stock market well up will probably go for german commercial syndicate investment.
charges are high from what I can see some of which are charged on total fund including non recourse equity part.
Also so many companies take a bite eg merrion product investing in germany.....merrion to be paid as well as elgin capital and belmont property managment etc etc
in essence these products are wrapped multiple times with life companies taking a fair old wallop of fees
also this is all riding on one building which is a worry.........would prefer some diversification
 
Agree with much of heinbloed's assessment of the current state of the German market. Don't forget though that in five years the Germans are obliged by EU treaty to open their labour market to the 10 new EU states. And Bulgaria and Romania might follow a few years later. I think this will help to change their aging demographic structure. The government might also change their immigration laws for people outside the EU to encourage highly skilled migrants.

One common piece of advice I read about buying over there is to make sure your property is "Seniorengerecht", which basically means suitable for old people - i.e. lift in appartment block, large bathroom with accessible shower etc.

As said by many others, don't expect capital appreciation (though you may be lucky and get it), but long term rental yields should be good.
 
Persius said:
Don't forget though that in five years the Germans are obliged by EU treaty to open their labour market to the 10 new EU states.

One common piece of advice I read about buying over there is to make sure your property is "Seniorengerecht", which basically means suitable for old people - i.e. lift in appartment block, large bathroom with accessible shower etc.
Click to expand...

Cheers for the above which i didnt know.
 
I wouldn't put too much hope on the expected new emigrant workers as potential buyers. Sure they have to live somewhere, but on the continent a fully capeable traffic infrastructure not to be seen -yet- here is up and running. A few hours in the train and you have crossed several borders, going home for the weekend.
Doctors from Germany are running now their surgerys in Poland and Tchechia. The staff is cheaper, the building rent is cheaper, medication and treatment is cheaper and so their charges are cheaper. Patients come from Germany to see their German Doctor in Poland or Tchechia. They can't/won't afford the fees of the German/Germany doctors.
So the opposite (of Persius' sugestion) can happen as well.
The employment agency of Poland is searching for German Workers to work in Polish car factories. 3000 jobs are vacant. Check the European employment agency for further details.
 
Hi,
I too have read the Augusta Berlin Medical Centre Fund with Interest, but having visited their website I noticed a lack of information on the historical performance of their 1st and 2nd Augusta fund, not to mention the performance of the Forestry Funds which the main Director Declan Kennedy is involved in.
By the way Is this Fund regulated by IFSRA?
 
Hope someone might clear up the following for me:

I understand that by buying an investment property in germany you pay tax in germany and ireland. Double tax. Tax is 25% in Germany and you will pay the remainder 17% in ireland (paying 42%).

But if you buy an investment property in ireland you still pay 42% on rental income so it is not the same rental tax rise buying in ireland and germany ?
 
phoenix_n said:
...a return of 6% on purchasing property in Hamburg with the capital not in risk of devaluing ....
Click to expand...

Hi phoenix_n

Just to pick you up on one minor point. Just because German property values are depressed at present does not mean there is no risk of further devaluations. I remember back ten or eleven years when a leading investment group in Dublin were recommending tracker bonds based on the Nikkei (spell?) stock index on the basis that it had fallen so far it could not fall any further. They were wrong, spectacularly so as it turned out.
 
heinbloed said:
I wouldn't put too much hope on the expected new emigrant workers as potential buyers...
Doctors from Germany are running now their surgerys in Poland and Tchechia. The staff is cheaper, the building rent is cheaper, medication and treatment is cheaper and so their charges are cheaper. Patients come from Germany to see their German Doctor in Poland or Tchechia. They can't/won't afford the fees of the German/Germany doctors.
So the opposite (of Persius' sugestion) can happen as well...
Click to expand...

Some valid points. As always, it's all about location. I agree with your analysis especially for most of former East Germany. The poor state of the economy and the proximity to the polish and czech borders mean that the traffic can indeed go in the other direction. Though Leipzig is attracting alot of high tech investment, I would be very hesitant about any East German cities. Many of them are experiencing population decline and are knocking down derelict appartment blocks (mostly those built by the communists after the war).

There are some areas in the former West Germany suffering similar problems. These are mainly cities in the Ruehr area (such as Essen or Gelsenkirchen) where there used to be alot of coal mining and steel industry. These areas are now also in relative decline.

But if the German economy picks up anywhere, it won't be there, but rather cities like Munich (IT and general good mix), Stuttgard (Auto industry and IT), Frankfurt (financial center) or maybe Hamburg (port). True, the eastern european workers may not be potential purchasers, but most definetly potential tenants of your property. During the height of the new economy boom (1999-2001) there was huge demand for rental property in Munich. So much so that some people ended up purchasing as they couldn't find anywhere to rent. The subsequent collapse of the dot com boom brought supply and demand back to a stable level, but the market is still tight and appartments don't stand vacant long.

Of course, the properties in these western cities are more expensive now already. But as said before it's not about capital appreciation in Germany, but rather rental returns. And yes I know that tennants have a lot of rights over there and there is a problem with squatting. So you have to be very careful in your choice of property and tennants or management company.

I must admit I'm not sure where Berlin fits into this analysis. It's in the east, it's broke and it's got huge unemployment. However it's now the capital, more and more stuff is getting centralised to Berlin and the property is incredibly cheap. Very hard one to call.
 
To Persius: Why do you think tax on property (rental income) in Germany is 25% ? Can you give us any sources for this information?
 
emnc said:
... the performance of the Forestry Funds which the main Director Declan Kennedy is involved in.
Click to expand...

Its amazing that a self-professed specialist in Irish forestry investment can suddenly re-invent himself as a specialist in German commercial property!
 
heinbloed said:
To Persius: Why do you think tax on property (rental income) in Germany is 25% ? Can you give us any sources for this information?
Click to expand...

Phoenix n said that, not me. I don't know how rental income is taxed. All I do know is that you can write off interest repayments against the rental income when calculating your tax due. So alot of investors take out an interest only morgage and also a seperate investment policy of some sort, to which they also make regular monthly payments. At some stage this is then used to pay back the capital.

The only hard figures I know of is 3.5% stamp duty (Grundbucheintrag I think), and typically 1.5% solicitor's costs. Estate Agent comissions, which the purchaser pays, vary from state to state. They're 3% in Bavaria and about 7% in Berlin if I remember correctly.
 
Sorry, Persius, my fault. Thanks for the answer anyhow.As you said rental income is taxed there, and it is possible to deduct several items like capital costs etc..But I never heard of a 25% tax on rental income before, though I never rented out property myself in Germany.
So what does Phoenix n say about the taxation of rental income in Germany, any hints where to look for detailed information, any links?
As far as I understand any rental income in Germany falls under the general income tax and the tax paid is therefore variable, depending on the "(Einkommens-)steuerklasse" - translated to "income tax class" - which is the personal tax band. And this can vary from year to year, from person to person. But I might be wrong, please let us know what you - Phoenix n- know about it.
 
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