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F.A.Q. for buyers

Facts for buyers

 

1. The current market in Dresden

 

Dresden and the surrounding area currently offer superb possibilities for development. The region of Dresden has the strongest growth in eastern Germany. You can find further information on our website: www.property-dresden.com/dresden.

 

Real estate purchasers can benefit from the dramatic increases in property prices which are predicted for the near future. For first-time buyers, the best possibilities are the residential properties such as small and middle-sized apartment blocks, as the lettings market in most parts of Dresden is intact and the risk for investors is low. For more experienced investors there is also the possibility to acquire properties at auctions, or those which were subject to defaulted loans. CITYMAKLER DRESDEN is able to offer such properties regularly.

Renowned funds managers have already recognised the boom in eastern Germany. One example is Fortress, which along with the property company WOBA has purchased the entire social housing stock (circa 50,000 flats) of Dresden. Goldmann & Sachs have purchased a large part of the stock of properties, which were subject to defaulted loans, from Hypo-Vereinsbank.

 

 

2.  What is the legal procedure for acquiring property in Dresden?

 

In Germany it is a legal requirement that contracts for real estate be signed in the presence of an authorised and qualified notary. The contract is prepared, checked and signed in the presence of the notary.

 

The purchase price is to be paid once a reservation notice has been made in the land registry – the “Grundbuch”. This is the “Auflassungsvormerkung”, a notice that the entry in the registry should be left open. The “Grundbuch” is the official list of all landowners in Germany. The new entry in the “Grundbuch” is supervised by the notary.

 

All official permits must be obtained. The reason is to prevent the same property being sold to more than one purchaser at the same time. It is also security for the purchaser, in view of his having paid the purchase price and transfer of the property.

 

Furthermore all outstanding mortgages must be settled. This is a release from obligations.

 

The notary is responsible for preparing and arranging the signing of the notary contract. No payment is due when the contract is signed, but about 10 weeks after the signing.

Transfer of ownership and the right to use and enjoy the property is complete after the purchase price has been paid, which is normally 10 weeks after the signing of the contract. At that point all income from the property, such as rents, as well as all costs are transferred to the purchaser. 

 

 

 

3. What kind of miscellaneous costs are there, and when are they to be paid?

 

The commission for the estate agent is one element of the miscellaneous costs to a purchase. This fee is 6% of the purchase price, plus Value Added Tax (VAT). The commission is due when the sales contract is signed, or at another agreed date.

There is also a purchase price tax, which is 3.5% of the purchase price; the fee for the notary which is 1% of the purchase price; and the fee for the entry in the land registry which is 0.5% of the purchase price.   

 

 

4. What other costs are there for an owner of real estate in Germany?

 

Firstly, there is the land tax. This must be paid annually and is the rate is dependent on the value of the building. The rate is around €0.30/m² per month. The cost of the land tax can be passed onto the tenants, and so is included in their supplementary costs.

 

Depending on the condition of the property, you should expect to spend about €0.50/m² per month on the maintenance of the building, in order to keep it in good condition, and so ensure that it is attractive to potential tenants.

 

We strongly recommend that you commission an estate agent to find tenants for your property, if you are not intending to use it yourself. Normally this will cost the equivalent of 2 months basic rent, plus VAT. In areas where there is a high demand for flats the tenants usually pay one month’s rent as commission to the estate agent, so that the landlord and tenant actually share this cost.

 

Owners who live in the flats themselves pay a so-called “Hausgeld” monthly to the house management. This “Hausgeld” consists of the miscellaneous costs, at €2.00/m², as well as the maintenance and administration costs which are around €17.00 per month.

 

The tenant is responsible for the miscellaneous costs element of the “Hausgeld”, and is paid by them monthly in advance in accordance with the tenancy contract. Certain elements of the “Hausgeld”, for example the maintenance and administration costs, may however not be passed onto the tenant.   

 

 

 

5. What should the real estate purchaser pay particular attention to?

 

It is especially important to work with an experienced and honest estate agent. The initial impression is important, as well as his or her experience with German and international investors, and his or her way of working with clients.

CITYMAKLER DRESDEN is the ideal partner, when it comes to property business in our region. Our estate agents speak English and have extensive experience in helping investors, from Germany and abroad.

 

We are proud to say that we have assisted major trust funds, among others, to select and acquire real estate in Dresden. It is also vital that you evaluate how attractive a property is to potential tenants. A good estate agent can be invaluable offering complete and comprehensive advice, who can compare the property with others in the neighbourhood and the rental income they yield, and who knows the current rental market in the city. 

 

The estate agent should also be one who offers a  lettings service, and is able to find and select tenants for you so that he or she can provide a complete service, from beginning to end, for the investor.

It is also important to evaluate the potential of a property to increase in value. Important features in this respect are the location, the building quality and the future development of the city. Only an experienced estate agent located in Dresden, such as CITYMAKLER, can offer such reliable advice. 

 

The trend of real estate purchases is clearly towards property in major cities as an investment. This is because of the general movement of populations away from the countryside into major urban centres. Not only young people, but also considerable numbers of people from older generations are moving in. Extensive infrastructure and the good condition of housing encourages more and more people to spend their “golden years” in a city with a population of 30,000 or more. Purchasing property in villages is an unreliable investment for the future.  

 

 

 

 

6. Tenancy  contracts in Germany – Rights and obligations.

 

There are legal restrictions on increasing rents in Germany.

A rent can be increased when there are good reasons, for example higher rents for new tenancies in other properties in the neighbourhood. Another reason can be the renovation and resulting increase in standard of the property.

The protection of tenants from notice to quit is clearly-defined. Possible grounds are when the tenant is in arrears with the rent, when the owner requires the property himself or when the tenant violates the tenancy contract.

 

Normally a deposit of 2 months rent, or at a maximum 3 months rent, is to be paid.

 

How often people in Dresden move home can be seen on the website www.dresden.de. Germans traditionally change homes less frequently than in other countries, such as in the USA. Germans are far more content to stay in their “own four walls” for a long time, and to become more attached to a rented flat. This has the result that the lettings market is comparatively stable.

 

Overseas property: Article in the newspaper "Daily Mail"