Investing in German property, especially in a new-build or renovation project, also means dealing with German developers — and the experience is quite different from dealing with developers in Hong Kong.
After the Second World War, Germany rapidly rebuilt its infrastructure and housing stock, and German reunification in 1990 gave development a further push, though that phase had ended by the early 2000s. The typical German property market does not include huge residential estates or skyscrapers. A typical German residential development is much smaller, rarely more than six stories. Strict building codes, and historical constraints such as not building higher than a church spire, make it almost impossible to build very tall or very wide. The old, large developers largely left the market as the sector stopped being attractive to them. Over the past decade, the German property market has continued to be dominated by typical single-family houses and small residential buildings — one reason Germany now has a shortage of more than a million apartments. Germany’s developer market is made up mainly of small and mid-size companies, most of them focused on a single regional market; developers that build projects nationwide are rare.
Family Firms, Not Listed Companies
Most of these small and mid-size companies are family firms with deep construction experience and a good understanding of the regulations, but their capital structure is very different from the large developers in Hong Kong or mainland China. These companies are rarely listed on a stock exchange. Their financial stability mainly comes from 10 to 30 years of accumulated results. They also maintain stable financing relationships with German banks, and new residential developments are mostly funded through loans from German banks or insurers. German developers typically commit 10–30% of the investment amount themselves.
How German Law Protects Buyers
Hong Kong and mainland China are classic buyer’s markets, where a deposit is usually required before purchase, and developers hold more of the bargaining power. Germany has different laws and rules governing the relationship between developer and buyer. The starting point is the highly credible land register. A regulation called the “Makler- und Bauträgerverordnung” (an ordinance covering estate agents and developers) sets out the payment schedule in the contract, along with many other guarantees for the buyer. If a developer does not provide the required guarantee, the contract specifies that no advance payment is required. The contract’s structure and terms are drafted to protect both developer and buyer, rather than favoring one side alone — which makes the contract more complex, but also a form of security for both parties.
Buyers also benefit from the “Forderungssicherungsgesetz” (a law protecting outstanding debts and guarantees), which gives the buyer a guarantee equal to 5% of the investment amount at the start of the project. The same logic runs the other way: if construction progress is achieved on schedule, the buyer must also make the corresponding payment.
German developers are also subject to more extensive legal and safety regulation, and must factor in the winter period from December to March, when outdoor work is not possible — this can push back the building timetable and the handover date, but these delays are already built into the contract, with special circumstances anticipated in advance.
Developers in Hong Kong and mainland China can design a residential project at scale and offer three or four standard floor plans. German developers, by contrast, must plan much more individually for each buyer. If you are considering investing in German property, it is worth meeting the developer and talking things through before you commit.
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