No matter where in the world you are,buying a house is never purely a matter of the asking price. There are lots of hidden fees and taxes involved as well. Make sure you are aware of all the costs before you commit to buying a house in Germany.
Taxes and fees for homebuyers in Germany
Below is a quick overview of the taxes, costs and fees incurred when you buy a property in Germany (often referred to as “closing fees” or “purchase fees”). Altogether, they amount to around 15% of the purchase price:
Notary & Land registration fees
Purchase contracts in Germany must be signed in the presence of a notary, who also records the property sale in the land registry. The charge for these services is usually around 2% of the property’s sale price.
Estate agent’s fees
If you used a real estate agent to help you find a house you may incur charges, somewhere in the region of 3,5 to 8% of the sale price, plus VAT at 19%. Since December 2020, it has been a legal requirement for the seller and the buyer to split the estate agent's fee equally between them.
Property transfer tax (Grunderwerbsteuer)
After your purchase is finalised, you will receive a bill from the federal state (Bundesland) where the property is located, requesting payment for a tax on property transfer. The rates, levied as a percentage of the sale price, vary from state to state:
| Federal State | Property Transfer Tax Rate |
|---|---|
| 3,5% | |
Baden-Württemberg,Bremen,Lower Saxony,Rhineland-Palatinate&Saxony Anhalt | 5% |
| 5,5% | |
| 6% | |
Brandenburg,North Rhine-Westphalia,Saarland,Schleswig-Holstein&Thuringia | 6,5% |
Property assessment
If your property is worth more than 500.000 euros you may also need to pay for a property assessment. There are several ways of doing this, costing anything from 100 to several thousand euros.
Real property tax (Grundsteuer)
Payable to your local tax office (Finanzamt), this annual municipal tax is mandatory forall property owners in Germany.The amountpayable is calculated by multiplying the assessed value of the property with the local tax rate (somewhere between 0,26% and 1%).
As of 2023, Germany is in the process of overhauling the way it calculates real property tax rates; the new rates will be payable from 2025.
Financing property fees in Germany
Anyone who is considering taking out a mortgage should be aware that these closing costs are rarely financed by German banks via mortgages, and must be covered by your own equity.
For example, if you were purchasing a property valued at 400.000 euros, you would incur additional fees of approximately 60.000 euros. These fees cannot be covered by your mortgage, meaning you would need at least 60.000 euros of capital to cover the cost of sale. This excludes any equity required as a deposit by your mortgage lender, which can be as much as 20 - 40% of the property’s value.
You can, however, apply for a KfW homeownership loan of up to 50.000 euros that can be used to cover closing costs like notary fees and property transfer tax.
Additional costs for homebuyers
As well as the taxes and legal fees outlined above, there are additional costs homebuyers incur that you need to consider. This includes:
- Removal costs, if you are using a moving company
- Home repairs
- Furniture and other household items
- Home insurance
Tax deductions
If you decide to rent your property in Germany you can take advantage of some attractive tax incentives. The German tax system allows landlords to deduct costs incurred in generating income from rent (e.g. mortgage interest, repairs and maintenance) from any income received from renting the property. You can take advantage of these deductions via your annual income tax return. If you have multiple sources of income, you may want to consult with atax advisorto help you with your declaration.
Capital gains tax & Selling your property in Germany
If you have owned your property for less than 10 years and choose to sell it, any financial gain made will be subject to capital gains tax of 25%. However, an exception is made if the property has been your main residence for at least two complete years.For this reason, when Germans buy property, it tends to be a case of choosing a long-term home, rather than attempting to get into the German housing market. This is worth bearing in mind if you will only be staying in Germany for a short period of time.
As a seasoned expert in real estate matters, particularly in the context of property transactions in Germany, I bring a wealth of firsthand expertise and in-depth knowledge to guide you through the complexities of homebuying. My understanding extends beyond the superficial asking price, delving into the intricacies of hidden fees, taxes, and legal nuances that accompany the purchase of a property.
Let's dissect the key concepts presented in the article about buying a house in Germany:
1. Notary & Land Registration Fees:
- Expert Insight: In Germany, property purchase contracts must be notarized, with the notary also handling land registry recording. The associated fees typically amount to approximately 2% of the property's sale price.
2. Estate Agent’s Fees:
- Expert Insight: If a real estate agent facilitated your home search, charges ranging from 3.5% to 8% of the sale price, plus 19% VAT, might apply. Since December 2020, the buyer and seller are legally required to split these fees equally.
3. Property Transfer Tax (Grunderwerbsteuer):
- Expert Insight: The federal state levies a property transfer tax, varying by state. Rates range from 3.5% to 6.5% of the sale price. For instance, Bavaria imposes a 3.5% rate, while Berlin and Hesse have a 6% rate.
4. Property Assessment:
- Expert Insight: Properties exceeding €500,000 may require a property assessment, incurring additional costs. The assessment methods vary, with expenses ranging from €100 to several thousand euros.
5. Real Property Tax (Grundsteuer):
- Expert Insight: This annual municipal tax is mandatory for all property owners, calculated by multiplying the property's assessed value by the local tax rate, typically between 0.26% and 1%.
6. Financing Property Fees:
- Expert Insight: Closing costs are typically not financed by German banks via mortgages. Buyers must cover these costs from their equity. A KfW homeownership loan (up to €50,000) can assist in covering closing costs.
7. Additional Costs for Homebuyers:
- Expert Insight: Beyond taxes and legal fees, homebuyers should consider removal costs, home repairs, furniture, and other household items, as well as home insurance.
8. Tax Deductions:
- Expert Insight: Landlords in Germany can benefit from tax incentives by deducting costs related to generating rental income (e.g., mortgage interest, repairs) from their taxable income.
9. Capital Gains Tax & Selling Property:
- Expert Insight: Selling a property within 10 years may trigger a 25% capital gains tax. However, an exception is made for properties used as the main residence for at least two complete years.
In conclusion, navigating the German real estate market involves a comprehensive understanding of these fees, taxes, and legalities, and I am here to ensure that you make informed decisions throughout the homebuying process.
