At the heart of the EU, Germany is a federal republic comprising 16 ‘Bundeslander’ (states). Re-united in 1990 after 45 years of separation into the Soviet controlled East Germany and West Germany, the country has borders with Austria, Belgium, Czech Republic, Denmark, France, Luxembourg, the Netherlands, Poland and Switzerland.
It also has a North Sea coastline to the north west, and Baltic Sea coastlines to the north east.
To the south are the Bavarian Alps. Almost a third of the country comprises forest and woodland.
Germany is a major industrial nation with major interests in car manufacturing and engineering as well as in service industries such as banking and insurance. It is the world’s largest exporter and the second largest importer. It is also the UK’s second largest export market, after the US.
The Foreign Office reports that more than a decade after reunification, there are still differences in living standards between the eastern and western Bundeslander with unemployment still a key issue in the east.
However, there are signs the country’s long period of economic stagnation is now at an end with healthy economic growth predicted over the next few years.
According to the Foreign Office there is a general threat from terrorism in Germany. ‘Such attacks could be indiscriminate, including in public places frequented by expatriates and foreign travellers’. However, ‘most visits to Germany are trouble free’, it said.
UK citizens do not require a visa to enter Germany. However, those intending to stay three months or longer must register with the German authorities (Einwohnermeldeamt) within seven days of arrival.
Those staying in Germany for a short visit are not normally required to register. Hotels are legally obliged to register guests and this information is passed automatically to Einwohnermeldeamt. There is no longer a requirement for EU Citizens to apply for a residence permit.
British investors are free to buy property in Germany without restriction.
German people have a long tradition of renting their homes while the tax system mitigates against property speculation and buying costs are relatively high – around 6 to 8 per cent of the purchase price plus an agent’s commission of approximately 6 per cent plus VAT. The upshot is that the property market is relatively slow meaning that investing in Germany should be for longer term capital growth.
In the interim, investors looking for rental returns can benefit by German property prices not having moved ahead at the same pace as EU partners and by strong rental demand from long term tenants. (Rental yields are said to be as high as 10 per cent in major cities although this is often in poorer areas where property values are expecting to fall – more realistic expectations in better areas would be between 4 and 6 per cent.
With many Germans moving from the poorer east to the more affluent west, there is a housing surplus in the east – much is in a poor state and earmarked for demolition or renovation. Germany also plans a major home building programme over the next few years, so shortages are unlikely.
When buying there is usually no pre-completion contract. The terms and conditions of the final contract – which must be signed before a notary (who acts for both sides) are for agreement between the parties. Buyers need to employ their own lawyer, should have contracts translated if necessary, and are recommended also to employ a tax accountant.
They must also satisfy themselves on the condition of the property they are buying. Mortgage financing is available, for up to 70 per cent of the purchase price. Long term fixed rate terms at relatively low rates of interest are on offer.
Capital gains tax applies when properties are held for less than 10 years – although the tax may apply to all properties from 2008.
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