Berlin ‘considers’ banning foreign buyers to counter house price rises

Concerns about rising residential and commercial rents are increasingly familiar in Berlin, while the cost of buying a home is fast moving beyond the reach of many. In response, the Berlin Senate is considering taking a leaf out of New Zealand’s book - by forbidding foreigners from purchasing property in the city.

Berlin 'considers' banning foreign buyers to counter house price rises
Jens Kalaene/ DPA
The statistics are difficult to dispute. In the last ten years, prices have doubled all across the German capital. Despite some of the most comprehensive rental protections seen in major European cities, long-term Berliners are being forced out as property prices have skyrocketed. 
Berlin Mayor Michael Müller has said the city was considering implementing the seemingly drastic step taken by New Zealand authorities in banning non-residents from purchasing property. 
“The Senator for Finance is working on proposals to prevent housing speculation. We are taking a constructive and flexible approach”, Müller told the Frankfurter Allgemeine Zeitung. 
The issue of rising rents has become one of the most controversial ones in the German capital, attracting regular protests and encouraging residents to call for greater restrictions
As it currently stands, there are few restrictions on purchasing property – regardless of whether the purchaser is a resident of Berlin or not – while rent increases are capped at ten percent per year. 
In New Zealand, restrictions have been put in place after the average rent across the country increased by almost double over the past eight years. The plan will see non-residents prohibited from buying property all across the country, although the prohibition will not apply to Australians. 
Australia and New Zealand are subject to a number of trade and partnership agreements, thereby preventing authorities from putting in place significant restrictions. Similar limitations apply in Berlin, where European Union law is likely to prevent the restrictions from being applied to EU members. 
With American, Israeli and Russian investors however making a significant impact on the property market, the law would still potentially impact a large amount of foreign investment capital.
Despite the consensus on reducing house prices, the idea hasn't won widespread support just yet. Both the CDU and the Greens – strange bedfellows at the best of times – have argued against the rule, saying it it would be difficult to implement and would result in an increase of fraudulent “straw men”, i.e German residents buying property on behalf of others.
The German property system does not employ a central real state register, meaning that it is difficult to determine the actual owner of a property with any degree of certainty. 
Reiner Braun, of the independent social science consultancy the Empirica Institut, echoes these concerns. He argues that the primary reason for rental and property price increases is not foreign buyers but a lack of supply in a city which welcomes 40,000 new residents each year
“It doesn't solve the problem and it is not a good plan. Behind the plan is the idea that foreigners are wicked or nasty landlords because they increase rents, fail to renovate and leave flats empty (to increase prices),” Braun said. 
“Whether that's true or not (in some cases), they could still always buy apartments through middlemen – while if we have more German ‘wicked or nasty' landlords, it still doesn't fix the problem.
“The way to beat the problem rather than just the symptoms is to eliminate the scarcity of homes (in Berlin). We must build 25,000 new homes per year, more than the 15,000 we currently build – all of which need to be served by good public transport connections,” Braun said. 
While the Mayor's office has not yet set a date for the release of the proposals, regardless of the end result it seems that after decades of upheaval, Berlin's ‘poor but sexy' days are numbered. 

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The rules foreigners need to know when buying property in Germany

If you are serious about buying a property in Germany, either to live in or as a form of investment, you'll need to know these important rules on everything from residency to taxes.

The rules foreigners need to know when buying property in Germany

As we all know, property is generally a solid investment – as long as you have enough cash to afford the considerable up-front payments involved. 

Knowing whether now is the right time to buy is not easy. A recent drop in property prices in some German cities after years of dramatic price rises could indicate that there are deals to be had. On the other hand, the decision by central banks to put up interest rates in response to inflation could mean that taking out a mortgage will become less attractive.

But it’s not just the higher costs of borrowing that you should be aware of when buying a property. Additional costs, including taxes and real estate fees, could add a further 10 percent to the total spend on top of the actual price of your new home.

Meanwhile, people hoping to buy a property for themselves should be aware that sitting tenants are well protected. If you buy a property that is already let you will have to wait for months or even years before you are allowed to move in yourself.

Residency rules

The first thing to clear up, which will come as a relief to those who don’t hold German citizenship, is that there are no restrictions on foreigners buying property in Germany. That applies regardless of whether you are resident in the country or not.

Arguably, one downside of this light-touch approach is that it has helped fuel the massive surge in property prices that has taken place in recent years.

A report by Die Welt newspaper in 2018 found that almost half of property deals worth €10 million or more were carried out by foreign investors. Studies also suggest that the Italian mafia have bought billions of euros worth of German property in order to hide the source of their ill-gotten gains.


Housing under construction in Lower Saxony. Photo: Julian Stratenschulte

The biggest additional cost of purchasing a property in Germany comes in the form of the Grunderwerbssteuer (land transfer tax). This tax applies both for properties that have already been built and for building plots.

The size of this tax is set at the state level, meaning that someone buying in Saxony (tax rate 3.5%), for instance, will face a much lower tax bill than some buying in neighbouring Thuringia (tax rate 6.5%).

Those huge differences in rates mean that the tax on a property sold at €500,000 could end up being €15,000 more just a few kilometres down the road.


The states with the lowest Grunderwerbssteuer rates are Bavaria and Saxony, both of which haven’t raised the tax at all this century. Most other states have adjusted the rate over the past decade and purchasers should expect to pay an additional six percent of the purchase price to the taxman.

Debate has been raging in recent years about whether the size of the Grunderwerbssteuer is making it impossible for young people to get onto the property market. Studies show that it takes the average German four years to save to pay this sum alone, which often can’t be financed through a mortgage.

Some states, such as Bavaria, are pushing for a federal law which will free first-time buyers from paying the duty. The federal government has also promised to reform this tax but nothing is set in stone yet.

Estate agent fees

Up until recently, the person or company buying a property had to pay a huge commission of over seven percent of the purchase price to the estate agent. Coming on top of the land tax, that was a prohibitive cost for many people looking to get onto the property ladder.

But a law which was passed through the Bundestag in 2020 ensured that the estate agent fees would have to be split evenly between seller and buyer. Since then the buyer has “only” had to pay around 3.5 percent of the property price to the estate agent.

Experts advise though that one should try and negotiate a lower fee with the estate agent before the final contract is signed.

READ ALSO: How to sublet your apartment in Germany

Notary fees

Another notable cost involved in buying a property in Germany is the notary fee, which is the sum you give to the public office that ensures that the change of ownership becomes a matter of official record.

People who tear their hair out at the patchwork of rules across the German states will be relieved to know that the notary fee is set across the whole country at 1.5 percent of the purchase price.

Sitting tenants

A German couple view an unrented property. Photo: dpa/RTLZWEI, EndemolShine Germany | RTLZWEI

Another key thing to consider when buying a property is whether it has sitting tenants. 

If you are buying the property as a long-term investment there are several advantages to purchasing one which is already rented out, not least the fact that let properties tend to cost significantly less than unlet ones.

When you buy a let property the tenants and their rental contract come with it, which means you won’t have to deal with the hassle of finding a new tenant and agreeing on a new rental price.

On the other hand, German rental law ensures that tenants are protected against sudden hikes in their rental terms, meaning you might take over a property that is leased at under the current market value and find it hard to raise the rents. Rental law also protects tenants from eviction so as to prevent landlords from pushing them out in order to re-lease the property on more lucrative terms.

One of the few legitimate grounds for cancelling a rental contract is if you or an immediate family member plans to move into it, something known as Eigenbedarf (personal use). However, German rental law even gives some protection to sitting tenants in this scenario.

Typically a tenant who has been living in the property for a number of years needs to be given nine months’ notice before you can move in. In some states though, local laws give much more protection. In Berlin property owners are subject to a ten-year freeze on evicting a tenant starting from the point at which the property is purchased.

These complex rules surrounding tenancy rights mean that one it is advisable to consult a specialist lawyer about the particularities of local law before you make any such purchase.