How about selling property owned in Germany?

We have been asked many times by investors how the market is right now in regards to selling property one owns in Germany. Providing the property is located in the right city (Munich, Frankfurt, Berlin in certain areas, Dusseldorf, Hamburg), the market is on a good uptrend. Speaking of selling also means however, as is usual in German, to consider the factors financed loan on a fixed term and tax issues. If you sell before the fixed loan terms are over, high penalties are unavoidable. And mostly almost uncalculable. As an example: We had two sales where the loan had another five years fixed terms. In one case the penalty was about 11.000 € on a 150.000 loan, in another about 12.000 € on the same loan amount. So beware of that factor and rather check with your bank before you sell…

The other factor is taxes. If you bought for investment and rented the property (i.e. not owner-used) you have to keep it for ten years in order to sell tax-free on the profit. Profit is calculated purchase price plus purchase cost (like notary, stamp fee, tax and brokers fee) against sales price. But: If you rented and had depreciations in your tax declaration, these are added to the profit! That can mean that you make a profit even when you do not sell for more than what you paid – and have to pay tax on it. After ten years the sale is tax-free as of current legislation.

So, to sum it up: If you consider selling, check into these two main factors first. And then get a good advise on the possible sales price. Both clients mentioned above still made a good profit from the properties they sold, even after penalties and taxes. And that is remarkable, after five years only – in Germany! The reason: The properties were in best locations in Frankfurt. We noticed price increases of up to 20% last year in some areas, but the average was around 10% in the last two years.

If you need help in selling a property or just advice, feel free to contact us.