November 28th, 2016
Berlin U-Bahn Line 1 at “Anhalter Steg” by Steve Parker – Wikipedia
German Tax reform proposals will boost Berlin real-estate market
In an article entitled “Tax reform could further heat up German real-estate market”, the German government owned ‘Deutsche Welle’ highlights that a recent proposed cut to the real estate acquisition tax could make purchasing Berlin properties even cheaper.
All of Germany’s 16 federal states – of which Berlin is one -levy a real-estate-acquisition tax of between 3.5 and 6.5 percent.
German house prices had been stagnant for years, but have recently grown faster than even in the UK. In Germany, apartment prices in seven major cities including Frankfurt and Berlin have risen 14.5 % alone in 2015.
The article points out that some politicians want to encourage local ownership and promote people to buy residential property and are calling for a basic flat exemption of €100,000 Euro to the property acquisition tax. When and if the acquisition tax will be either reduced or removed, it will mean that more Germans would be able to take advantage of the present low-interest loans and buy property.
Others are calling to cut the tax entirely, but everyone knows that ‘ cutting taxes’ is a slogan often heard in election years, and Germany will have federal elections this coming September 2017.
The Deutsche Welle article points out that German residential property transactions exceeded 23.3 billion Euro compared to 13.3 billion, quoting statistics from real-estate consultant CBRE.
Germany – historically very low Home Ownership
Germany has historically had very low home ownership compared to most Western countries – 53% compared with an EU average of over 70 %. In the past German real estate values, adjusted for inflation, didn’t increase very much. After the financial crisis in 2007/2008, credit became very cheap and central banks lowered their interest rates to near zero. At this time both German and international investors jumped on the “undervalued” German property market .
Just the opposite is happening in Spain where a meltdown in the country’s property market at the height of the European financial crisis, have forced young Spaniards to turn their backs on their parents’ dream of owning a home.