Investors who buy overseas property often carry over the habits of their home market, but that approach does not always work. Different cultures and different histories produce very different pictures of what a “good” home looks like. Because most overseas buyers do not live in the property they buy, understanding local preferences for a home or apartment matters more than personal taste. Even for owner-occupiers, the property will eventually be sold, so it helps to understand German style from the outset.
Most investors can follow this logic, but they still have many questions about the details and differences involved. It is not possible to answer every question here, but a handful of key numbers can help with decisions and give a fuller picture of German housing habits.
50%
To begin with, Germans are not really city-center people. They accept good infrastructure and fast transport, but living in the inner districts of cities such as Hamburg or Berlin is not their “dream.” More than 50% of Germans prefer to live on the outskirts of large cities, in small towns, or in villages away from the city. This might seem odd, since infrastructure on the edge of these cities is not always ideal, and public transport to work can sometimes be inconvenient. Yet most Germans are willing to drive, or to take a 40-minute public transport journey to work — roughly a 40-kilometer trip, which is common in Germany. Working from home 1 to 3 days a week is becoming more common, and this is making living further out even more appealing. That number, 40, comes up again shortly.
50 Square Meters
Germans have clear preferences on living space: around 50-70 square meters for two people, and 90-120 square meters for households of more than two. Room layout and storage options matter a great deal. Interestingly, Germans across age groups still dream of a detached family home with a garden and enough space, but for most this remains just a dream. In practice, Germans live in apartment buildings with 5 to 10 units; a modern high-rise with 100 or more units is not the German dream.
40%
The next number, 40, is the ratio of rent to income. Germans will spend at most 40% of their income on rent. If an investor knows the average income in an area, it becomes easy to estimate the potential rent for that area. For example, in an area with an average income of around €3,500, the potential maximum rent works out to roughly €1,400. This is only a rough estimate, of course, and other factors matter too, but rental yield is an important factor in any investment decision.
Layout and Interior Fit-Out
Germans do not like stepping directly into the living room or kitchen from the front door. There is usually a small entrance hall, or a somewhat larger hallway, right after the door, and from this hall or hallway you can reach every other room. You will find heating in every home, but not air conditioning — ventilation systems or fans only tend to appear in new-build homes, and fresh air otherwise comes only through open windows. The main reason is energy and heating costs, both of which are expensive in Germany, and windows are typically thick, insulated with three to five layers of glass.
Germans like to bring their own furniture and kitchen, so landlords are not generally required to install a kitchen when they rent out a property. Tenants mostly bring their own kitchen equipment or buy a new kitchen.
German tenancy law is very tenant-friendly. Most leases are open-ended, and tenants tend to stay in the same home for a long time. Rent can rise from time to time, but any increase needs to be prepared for in advance and set out clearly in the lease from the start.
More investors are now renovating their properties before renting them out; a furnished home opens up more possibilities, since it suits short-term tenants and the rent can be adjusted more freely, particularly in large cities — a good opportunity for a higher return on investment. This may call for a careful agent, or a company structure that can help reduce tax, but for the details it is best to ask Zagdim.
Every investment faces different circumstances, and it is interesting to see how an investor’s outlook can change, sometimes ending up quite different from the original decision. This overview is intended to help readers understand the mindset behind the German property market.
Have a question about this guide? Leave a comment below, or ask Zagdim directly.
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