Property Investment in Germany: Foreigner’s Guide (2025)

Germany is one of Europe's largest and most stable real estate markets, attracting investors with its strong legal system, solid rental demand, and wide range of cities to invest in.

However, navigating the market as a non-resident requires an understanding of local regulations, taxes, financing rules, and the rental landscape, especially if you plan to earn income through long-term or short-term rentals.

Whether you're looking to diversify your real estate portfolio, buy a second home, or make a rental investment, this 2025 guide breaks down everything you need to know about buying property in Germany as a foreign investor.

10 Things to Consider Before Investing in Germany’s Real Estate Market

• Can foreigners buy property in Germany
• Best cities and regions to invest
• Average property prices
• Rental yields and rents
• Market performance (past and current)
• Buyer taxes and fees
• Property-related taxes
• Short-term rental legislation
• Mortgages and financing
• How to buy property in Germany: step-by-step

1) Can Foreigners Buy Property in Germany?

There are no restrictions on foreign nationals buying property in Germany. Financing is possible for foreigners, especially for EU nationals who can expect similar treatment to German citizens.

Non-EU nationals expect a higher downpayment and/or interest rate due to the higher risk involved.

There is no citizenship by real estate investment program in Germany; thus, residence or citizenship is something you have to take care of by other means (e.g, employment).

2) Best Regions and Cities to Buy

Germany has several strong real estate markets, each with its own character and investor appeal. Here are some of the more liquid and in-demand cities:

Berlin - Germany's capital is diverse, international, and full of energy. It attracts a mix of young professionals, creatives, and expats, with neighborhoods like Kreuzberg and Friedrichshain standing out for their rental demand and lifestyle appeal. Despite strong growth over the past decade, Berlin still offers opportunities for long-term appreciation.

Munich - One of Germany's wealthiest cities, Munich combines high rental demand with low vacancy rates. It's clean, safe, and well-run - and while prices are high, so is tenant quality. The city's mix of economic stability and lifestyle appeal makes it a favorite for long-term investors.

Frankfurt - As the financial heart of Germany, Frankfurt draws both corporate tenants and international investors. Its skyline, business district, and major airport make it a central hub. Yields tend to be moderate, but demand is steady, and the market is very liquid.

Cologne - A friendly, open city with a strong rental market. Cologne blends historic charm with modern city life, and hosts major events like one of Europe's largest pride festivals. Properties in central areas or near the universities tend to rent quickly.

3) Average Property Prices

Average square meter prices:

Square meter prices in Germany are quite high, especially in Munich, but there are still cities where you can find lower-priced entries. As of 2024 Q4, the square meter prices are as follows:

• Munich - €9,032
• Frankfurt - €6,358
• Hamburg - €6,101
• Berlin - €5,317
• Stuttgart - €4,838
• Cologne - €4,759
• Bremen - €2,653

Average property prices (1-bed):

Median property prices vary by city. As of now, the typical prices for 1-bedroom apartments are as follows:

• Munich - €568,000
• Frankfurt - €399,000
• Hamburg - €353,000
• Berlin - €329,000
• Cologne - €299,000
• Stuttgart - €272,000

4) Rental Yields and Rent Prices

Long-term rental yields in Germany are generally low (below 5%), so from a pure cash flow perspective, the returns are modest, especially once costs are factored in. However, when combined with long-term capital appreciation, many properties can still offer solid investment potential.

Note: If you plan to rent out your property long-term in Germany, keep in mind that the country's rental laws strongly favor tenants.

Average gross rental yields in major German cities:

• Munich - 2.76%
• Berlin - 4.76%
• Frankfurt - 3.47%
• Stuttgart - 4.49%
• Hamburg - 2.86%
• Cologne - 3.47%

Current rental rates for 1-bedroom properties in major cities are approximately as follows:

• Munich - €1,350
• Berlin - €1,388
• Frankfurt - €1,350
• Stuttgart - €1,100
• Hamburg - €900
• Cologne - €845

Germany rent price index:

Data Source: OECD.

5) Real Estate Market Performance (Past and Current)

When investing in Germany's property market, it's important to consider the bigger picture. Germany's housing market avoided the crash that hit much of the world after the 2008 financial crisis. In fact, from 2011 to 2019, home prices rose by over 50%, or around 38% after adjusting for inflation.

Low mortgage rates during this period made it easier for families to upgrade to larger homes, while also helping first-time buyers get on the ladder.

Even the COVID-19 pandemic didn't slow things down. With demand outpacing supply in many major cities, prices kept climbing, up 8.7% in 2020 and another 12.6% in 2021.

But by 2022, the market began to cool. Prices fell 3.6% that year, and dropped further in 2023, down 7.5% as inflation, higher interest rates, and weaker consumer confidence started to bite.

Germany's house price annual change:

Data Source: Statistisches Bundesamt (Destatis).

6) Buyer Taxes and Fees

Compared to many other European countries, Germany's property transaction costs are on the higher side, but not excessive. When buying, expect to pay an additional 7.5% to 12% on top of the purchase price. Selling costs typically range from 1.5% to 3%, plus capital gains tax, which is progressive and can range from 0% to 45%.

Here's a full breakdown:

7) Property Related Taxes

Germany imposes several property-related taxes, including on rental income, which is taxed at progressive rates. Property owners can deduct expenses related to generating, maintaining, and protecting rental income. Depreciation is typically 2% annually for existing buildings and 3% for newly built properties during the first eight years.

Note: If maintenance costs exceed 15% of the property's purchase price in a given year, they cannot be fully deducted immediately. Instead, they must be added to the property's depreciable base and written off over time.

Germany's corporate tax rate is 15.825%. For larger investments, it's often more efficient to purchase property through a company rather than as an individual, due to potential tax advantages and flexibility.

8) Short-Term Rental Legislation

Short-term rentals are legal in Germany, but heavily regulated-especially in major cities. Rules vary by municipality, and hosts are often required to register their property, obtain permits, and display registration numbers on listings.

In Berlin, renting out your entire apartment requires a permit and is limited to 90 days per year unless it's your primary residence. Munich allows up to 8 weeks per year without a permit. Other cities like Frankfurt and Düsseldorf apply tourist taxes and may have similar restrictions.

Non-compliance can result in fines, and enforcement has tightened in recent years. Short-term rental income is taxable, and whether it's considered passive or business income depends on how frequently you rent and whether services are provided.

Before listing, it's essential to check local rules, obtain the necessary permits, and understand the applicable taxes.

9) Mortgage and Financing Options

If you plan to finance your property purchase, it's advisable to approach multiple banks in Germany to compare lending terms. The country has a well-developed banking system, and non-residents, including foreigners, can secure mortgages.

However, EU nationals generally receive more favorable terms than non-EU buyers, who may face higher interest rates and stricter requirements. A minimum 20% down payment is typically required, though non-EU investors may need to contribute 30-50%. Be sure to factor this into your overall budget.

Germany's mortgage loan interest rates:

Data Source: ECB.

10) How to Buy Property in Germany: Step-by-Step

1. Research and Find Property: Use platforms like Immobilienscout24.de, Immowelt.de, or work with a local agent. Research pricing, yields, and legal restrictions in your chosen city.
2. Get Legal Advice: Hire an English-speaking lawyer or notary early. They will ensure documents are correct and explain your rights.
3. Make an Offer and Conduct Due Diligence: Visit the property. If your offer is accepted, hire a surveyor to inspect for defects. Review all legal documents before proceeding.
4. Sign the Sale Contract: The notary drafts the contract. Both parties sign in their presence. The notary explains all terms and confirms the agreement.
5. Payment and Registration Pay: the purchase price into the notary's escrow account. The notary handles land registry filing and distributes funds. Taxes and fees are paid at this stage.

Timeline: 8-12 weeks from offer to registration.

Need Help?

Buying property in a foreign country can feel overwhelming, but we're here to help.

At Global Property Guide, we offer:

• Data-backed insights on property prices, rental yields, and taxes
• Country-specific legal and tax guidance through our partner network
• Pre-screened investment properties, including income-generating Airbnb units
• 1-on-1 consultations with real estate experts focused on international buyers
• Step-by-step buyer support, from due diligence to closing

Whether you're looking for your first investment in Germany or expanding your international portfolio, we can help you make smart, secure decisions.

Contact our team or book a free consultation to get started.