After the latest rise in Property Sales Tax purchase cost for Property Investment in Berlin is now at roughly 12%, depending on the size of the investment.
One of the most asked questions by investors new to Berlin is regarding the typical cost involved in making a real estate investment. Since we last published this overview in December 2007 the property sales tax has gone up to 4.5% and since April 1st of this year is at 5% where about half of the German states are.
The cost depends on the price of the property and the cost tables for the notary public and the land register. They are digressive, in other words, the higher the price, the lower the percentage of the cost.
For a property with a purchase price of € 1 million the cost would be roughly:
Notary Public
for the contract
6,965
For an escrow account if required (based on $ 500k) 3,020 €
Land Register
4,280
Property Sales Tax
5% in Berlin
50,000
(4.5 – 5% rest of Germany except Hesse, Bavaria and Saxony 3.5%)
Agent Commission
Between 5 and 6 % plus VAT 19%,
(assume 5%)
59,500
Total
120,745
For a property with a purchase price of € 2 million the cost would be roughly:
Notary Public
for the contract
13,660
For an escrow account if required (based on € 1 mill.) 5,995 €
Land Register
8,410
Property Sales Tax
5% in Berlin
100,000
(4.5 – 5% rest of Germany except Hesse, Bavaria and Saxony 3.5%))
Agent Commission
Between 5 and 6 % plus VAT,
(assume 5%)
119,000
Total
241,070
For the quoted size of investment as a rule of thumb it is safe to use 12 % purchase cost for an initial calculation, with higher values reducing the percentage slightly.
These figures also identify the items where savings can be achieved:
The cost of financing will depend on many factors like the amount of equity used etc.. There will be cost for Technical Due Diligence and valuation, "handling fee" between 0.25 and 1 % of the loan charged by the bank and entry of the loan into the deeds register. With the right approach and experience there is also a money saving way of doing this.
Naturally there are many more aspects to be considered before making a purchase: Review of the rental contracts, maintenance, ancillary cost to mention only a few of them. Language can be quite an obstacle because an investor cannot expect every property manager or care taker to speak English.
Why is Berlin-Prenzlauer Berg still a Destination for Property Investors?
Over a period of only 3 years the purchase prices for apartments in Prenzlauer Berg rose from 2,300 €/m² to 3,000 €/m² while the rents in the same time span went from 7.30 €/m²/month to 9.24 €.
How to Avoid the Double Commission Trap for Properties in Berlin
In periods of high demand with the need for quick decissions the danger of springing the Double Commission Trap is high. Some agents are even focussing on setting them up for some easy money. Find out how to easily avoid the danger.
Berlin Residential Market Report 2012
GSW / CBRE have published their 2012 Annual Housing Market Report for Berlin.Main conclusions• Rents: Expensive rents get more expensive and moderate rents remain affordable.• Comparison: The Berlin Residential market still offers more for less than other German cities.• Scoring: Pankow, Friedrichhain-Kreuzberg and Treptow-Köpenick are in high demand with investors and in advanced positions on the investment cycle.
