House prices in Germany have risen, though economic growth is easing:
Another indicator, the hedonic price index rose 2.0% y-o-y to August 2011 (-0.42% in real terms) according to Hypoport AG.
Like many other EU countries, from 2008 to 2009 Germany was hit by weak private consumption and poor export performance. In 2009, Germany’s GDP took a 5% nosedive, hitting the housing market. New home prices dropped 3.1%during the year to June 2009, while the average price of apartments dropped 5.1% y-o-y to May 2009. Existing home prices experienced particularly sharp declines, with falls of 12.1% y-o-y to April 2009.
Yet so far German house prices have been unaffected by this year’s economic slowdown.
Has housing demand been boosted by Germany’s strong recovery from the 2009 recession, by its 3.6% GDP growth in 2010? A boost from the strongest economic growth since reunification can’t be ruled out. But perhaps something else is happening?
- The overall house price index for apartments rose by 4.3% during the year to August 2011 (1.85% in real terms), its highest increase since 2006.
- The average price of new detached houses was up by 2.8% to €238,484 (0.39% in real terms) from a year earlier.
- The average price of existing homes was down by 1.3% to €174,707 (-3.61% in real terms).
Another indicator, the hedonic price index rose 2.0% y-o-y to August 2011 (-0.42% in real terms) according to Hypoport AG.
Like many other EU countries, from 2008 to 2009 Germany was hit by weak private consumption and poor export performance. In 2009, Germany’s GDP took a 5% nosedive, hitting the housing market. New home prices dropped 3.1%during the year to June 2009, while the average price of apartments dropped 5.1% y-o-y to May 2009. Existing home prices experienced particularly sharp declines, with falls of 12.1% y-o-y to April 2009.Yet so far German house prices have been unaffected by this year’s economic slowdown.
Has housing demand been boosted by Germany’s strong recovery from the 2009 recession, by its 3.6% GDP growth in 2010? A boost from the strongest economic growth since reunification can’t be ruled out. But perhaps something else is happening?
Analysis of Germany Residential Property Market »
RENTAL YIELDS
Last Updated: May 30, 2011
German rental yields are relatively low. The price of apartments in Berlin has moved up over the past few years, and as a result gross rental yields have fallen from between 5% to 7% in 2007, to between 4.3% and 5% today – i.e., more or less in line, in terms of return, with apartments in Frankfurt or Munich.
There is still a clear hierarchy in terms of costs, however, with Munich more expensive than Frankfurt, and Frankfurt more expensive than Berlin.
There is still a clear hierarchy in terms of costs, however, with Munich more expensive than Frankfurt, and Frankfurt more expensive than Berlin.
TAXES AND COSTS
Last Updated: Aug 03, 2011
Rental Income: Rental income is taxed at progressive rates, up to 45%.
Capital Gains: Properties held for more than ten years are not liable to tax on capital gains.
Inheritance: Inheritances are taxed at progressive rates, depending upon the relationship to the deceased, and the value of the inheritance. Spouses and children are taxed at progressive rates, from 7% to 30%.
Residents: The same tax system applies to residents and nonresidents except for various tax allowances and filing options e.g. joint returns.
Capital Gains: Properties held for more than ten years are not liable to tax on capital gains.
Inheritance: Inheritances are taxed at progressive rates, depending upon the relationship to the deceased, and the value of the inheritance. Spouses and children are taxed at progressive rates, from 7% to 30%.
Residents: The same tax system applies to residents and nonresidents except for various tax allowances and filing options e.g. joint returns.
BUYING GUIDE
Last Updated: Mar 21, 2007
Roundtrip transaction costs are low to moderate at around 7.9% to 12.6% of the total price. Real estate transfer tax is fixed at 3.5% while real estate broker’s fee is negotiable from 3% to 6%, plus 19% VAT.
LANDLORD AND TENANT
Last Updated: May 25, 2006
German law leans signifcantly toward the tenant.
Rents: While rents can be freely agreed, “exorbitant” rents can subsequently be appealed.
Rent increases are controlled, and cannot exceed more than 20% in nominal terms (less in real terms) over three years.
Tenant Security: Unlimited contracts are standard, effectively giving the tenant security of tenure. The tenant can object to the “ordinary notice”, and demand continuation, if termination of the lease would give rise to hardship for himself or his family that would be unjustified, even in the light of the landlord’s legitimate interests.
Rents: While rents can be freely agreed, “exorbitant” rents can subsequently be appealed.Rent increases are controlled, and cannot exceed more than 20% in nominal terms (less in real terms) over three years.
Tenant Security: Unlimited contracts are standard, effectively giving the tenant security of tenure. The tenant can object to the “ordinary notice”, and demand continuation, if termination of the lease would give rise to hardship for himself or his family that would be unjustified, even in the light of the landlord’s legitimate interests.
ECONOMIC GROWTH
Last Updated: Oct 18, 2011
Germany’s weakening economy and the bailout
Germany came out of recession 2009 with 3.6% growth in 2010, its fastest growth since reunification in 1990. The growth was attributed to export recovery and increased domestic demand.
However as the world’s second largest exporter, Germany’s economy is greatly affected by any exports slowdown. Economic turmoil in EU, which accounts for almost two-thirds of German exports, and more than 40% into the eurozone, will inevitably impact Germany.
The slowdown is already evident in the sharp decline of GDP growth from 5.0% during the year to Q2 2010, to 2.8% during the year to Q2 2010. Germany’s GDP growth in 2011 is expected to be 2.7%.
Germany, being Europe’s economic powerhouse, is currently playing a crucial role in the sovereign debt crisis in Europe.
The country is in a difficult position. German banks are major creditors of the vulnerable economies.
So while Germany has resisted aiding its less-disciplined neighbors, as the crisis has continued it has progressively given in to pressure, approving a €22.4 billion contribution to bail out Greece in May 2010. In September 2011, Chancellor Merkel won the backing of German lawmakers to expand the €440 billion European Financial Stability Facility (ESEF) bailout fund.
However as the world’s second largest exporter, Germany’s economy is greatly affected by any exports slowdown. Economic turmoil in EU, which accounts for almost two-thirds of German exports, and more than 40% into the eurozone, will inevitably impact Germany.
The slowdown is already evident in the sharp decline of GDP growth from 5.0% during the year to Q2 2010, to 2.8% during the year to Q2 2010. Germany’s GDP growth in 2011 is expected to be 2.7%.
Germany, being Europe’s economic powerhouse, is currently playing a crucial role in the sovereign debt crisis in Europe.
The country is in a difficult position. German banks are major creditors of the vulnerable economies.
So while Germany has resisted aiding its less-disciplined neighbors, as the crisis has continued it has progressively given in to pressure, approving a €22.4 billion contribution to bail out Greece in May 2010. In September 2011, Chancellor Merkel won the backing of German lawmakers to expand the €440 billion European Financial Stability Facility (ESEF) bailout fund.
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