Munich - House Purchase
There are pros and cons for buying a house in Munich, particularly if you are intending to sell it after only a short period.
In addition to the cost of the property itself, you will need to budget an additional 8.5%-10% for property tax, notary fees and real estate agent fees. These are called 'weiche Kosten' or 'soft costs'.
The real estate agent's fee "Käuferprovision" is normally around 1.5% of the value of the property, although it can vary from 0% if you purchase directly from the developer, to 3.8%, depending on the real estate vendor. In addition to this, legal fees cost around 1.5% of the value of the property. These costs can be shared between the buyer and the seller. Make sure that such agreements are written into the contract of sale.
The buyer must pay a property acquisition tax "Grunderwerbssteuer", normally 3.5% of the value of the property. In addition to this there is a yearly real estate tax. Many factors contribute to the amount of tax, depending on location and the size of the property, so a general sum does not apply.
Property prices are expensive. Although many financial institutions are currently advertising investing in property, you need at least 20% if not 30% of the value of the property up front before they will consider giving you a loan for the remainder. Another drawback is that if you sell the property within 10 years, then you are liable to pay capital gains tax, which is charged at the same rate as income tax.
On the plus side, the government has incentives for property owners. If you buy a newly-built property, the state will refund you 5% of the total price of the new property every year for eight years. If you buy an established property the state will refund you 2.5% of the price of the property per year for eight years. If you have children under 18 who are students (at school, university or doing an apprenticeship), the state will pay you an additional 1278 Euro per child per year for eight years on top of any existing child endowment payments (as long as the child remains under 18 or studying).
If you do decide that all of this favours you buying a house, there are further things to consider. It is wise to know as much as possible about the area you are thinking of purchasing in. Look at community services, street maintenance and lighting, proximity to major roads, public transportation, neighbours' lifestyles, safety, facilities, parks, quality of education and proximity to home, availability of recycling services, proximity to sources of noise, odour or pollution, proximity to grocery stores and drug stores.
Things you should check on the property itself before you decide to buy it are foundations, drainage, floors, attic, heating, electrics, plumbing, hot water system and appliances, exterior walls, garage, roof, landscaping, doors and windows. You should have a professional inspection before buying (check with the mortgage company prior to organizing this yourself, as they may use a specific inspection company).