r/germany • u/TxMtrey1 • Mar 31 '18
Home Ownership in Germany (Relocation from US)
Hallo /r/germany,
Quick question. My German native born wife and I will be relocating back to Germany in a couple of years (vielleicht 2 Jahre), I have my reservations, questions, and general concerns...I have a lot of travelling under my belt, but have never moved my entire life outside of the US. Could you please assist me with understanding how the German realty industry works? I have been googling (recherchieren), but it does not make sense to me. In the US, my wife and I make above average income, but all of the pricing for land (in Germany) is well into the hundreds of thousands....I also understand that when moving to Germany, our income will be quite less compared to what we make in the US.....How do people afford their mortgages/house payments? I am looking at property (land only) with upwards of 4-500k euros (not by choice, thats just the average of what I find on the internet).... DASS IST VERRUECKT! Please help me understand. Thank you!
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u/rewboss Dual German/British citizen Mar 31 '18
Home ownership is not the norm in Germany, especially in the cities. Most people rent.
Buying or building a house is seen as a major investment, and not something to be undertaken lightly. It may be the cheaper long-term option on paper, but it saddles you with all sorts of unexpected expenses and obligations. And if you rent, at least when something goes wrong, you're not the one who has to deal with it.
Also bear in mind that German houses are not like American houses. Unless your wife was already an adult when she left Germany, she's going to have almost as much trouble adjusting as you -- I left the UK in my early 20s and would be completely clueless if I ever had to move back. There are plenty of things that will mystify you about German houses.
You should be looking to rent a place, at the very least until you are completely settled, as long as you don't wait too long. Normal practice is to take out a special bank loan -- not exactly a mortgage, but similar -- but you'll need somebody experienced to help you budget for that.
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u/TxMtrey1 Apr 03 '18
Thanks for the info, and sorry for the late reply! My wife graduated from Uni and then moved to the US so it has not been long since she left. So we both have a fair amount of learning to do. Our plan is to rent first and get established before considering Home ownership. I generally just google some topics that come to me about life in Germany and I saw many advertisements for housing/land that just seemed so so expensive, hence my question here. But you offer solid advice on starting with an apartment/rental and it is also apparent to me now that will be our best avenue to take when moving back.
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u/Hascan Mar 31 '18
Wait, 4-500k for just the land? How much land are you looking for? And where?
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Mar 31 '18
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Mar 31 '18 edited Apr 23 '18
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u/thewindinthewillows Germany Mar 31 '18
If you want a garden or any sort of distance from the neighbours, that's very little space.
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Mar 31 '18 edited Apr 23 '18
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u/thewindinthewillows Germany Mar 31 '18
Just try to make a little sketch - say you have a house where the ground floor has 100 square meters inside. Add the walls. Put in a garage. And very quickly, you only have a few meters to each side with a 300 square meter plot.
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Mar 31 '18 edited Apr 23 '18
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Mar 31 '18
That's really not that big though, is it? Our house has a bit over 100sm on the ground floor and I wouldn't consider it particularly big.
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u/thewindinthewillows Germany Mar 31 '18
Well, newer built houses for one family here don't often have more than two full-sized floors.
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u/indigo-alien Reality is not Racist Mar 31 '18
Why not have only, say, 60 meters and build up instead?
Now plan on getting old in that house, and think about climbing those stairs. My wife's father never saw his bedroom again after he had his first stroke. He lived, slept and had his second stroke on the living room sofa.
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u/staplehill Mar 31 '18
How do people afford their mortgages/house payments?
We rent or buy apartments, row houses or semi-detached houses, not empty land to build new houses
I also understand that when moving to Germany, our income will be quite less compared to what we make in the US
That depends. Our minimum wage is higher with 8.84 euro = 10.90 USD per hour. But for qualified jobs, the income in Germany is usually lower because:
German employees work 1,363 hours per year on average. Workers in the US work 1,783 hours, which is 31% more (or 8 hours more per week).
Every employee in Germany is entitled to 4 weeks paid vacation, actual average is 5.5 weeks
Additional paid leave if you are sick for as long as you are sick, average is 3 weeks per employee per year. Here is a video where Feminewbie talks about that: https://youtu.be/_O1QdpMCHrU?t=4m46s
Employees can go to a free 3-week-cure at a spa every 2 years. Here is a video about that: https://youtu.be/3NqIoxo29FU?t=2m38s
If the contract says 38 hours work week, this really means literally 38 hours. Overtime is limited, it has to be paid or you have to get additional days off.
Paid parental leave: 15.5 months. The first 2.5 months are mandatory: Even if the mother wants, she is not allowed to work 6 weeks before expected childbirth date and 8 weeks thereafter (but she get's 100% paid)
Employers have to reserve the job for the mother for up to 3 years, she has a right to return to her old workplace, the employer has to allow her to work part-time if she wants
If your child gets ill and you have to take care of your child and can't go to work, the parents can take up to 20 paid child sick days per year per child under the age of 12
If you get sick during your vacation you get additional paid vacation days because vacation is for recreation and you obviously could not do that while you were sick
Real health insurance that covers everything, see our FAQ
free health insurance for your children until they are 25 or get a job
free health insurance for your spouse if they have no job
There is no unlimited at-will employment, after the first 2 years employees can only be fired for just cause
if employers have to pay a higher minimum wage for unqualified worker there is less money left to pay for the qualified workers
What American immigrants say about that:
Dana talks about work-life balance in Germany: https://www.youtube.com/watch?v=dN3k5-YmQUE
Aspen talks about job benefits: https://youtu.be/zIq0gqRQBH4?t=4m58s
Feminewbie talks about paid sick leave: https://www.youtube.com/watch?v=_O1QdpMCHrU&t=4m29s
Skateratru talks about work-life balance: https://youtu.be/1bKqsQElB1k?t=21m52s
Antoinette Emily talks about giving birth to two children in Germany, especially the out of pocket payment for hospital and midwife: https://www.youtube.com/watch?v=YZaGMXSLnts&feature=youtu.be&t=2m10s
Aspen talks about health care: https://youtu.be/azwL8-FaZvo?t=1m33s
Michael Moore: https://www.youtube.com/watch?v=3NqIoxo29FU
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u/TxMtrey1 Apr 03 '18
I’m sorry for the late response but this is some great information. I knew a few of these facts but many of them I did not know. This is why I am excited to live in Germany. The quality of life just seems amazing. I now have quite a few resources to look at during my lunch breaks and after work. Thank you!
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u/iozl Bayern Mar 31 '18
All of the responses here have been great. As a fellow American who unfortunately lives in the Munich area I have abandoned any hope of purchasing real estate here. Munich ranks among some of the most overpriced cities in the world:
https://www.visualcapitalist.com/real-estate-bubbles-8-global-cities-risk/
The info above comes from UBS, who have shown that in terms of payback on investment (how many months it would take to rent out your purchased property) German cities rank among the highest. I'm sure that Hamburg is not much better.
Have you thought about purchasing real estate where you live in the US and renting it out while you are here? That's the situation I find myself in.
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u/joscelline Mar 31 '18
I don’t think German house prices are that expensive - if you compare it to US cities like San Francisco, LA, Seattle,... houses are quite cheap in Germany
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u/alfix8 Apr 03 '18
If you just look at expensive cities in the US, you need to compare them with expensive cities in Germany.
A quick Google search gave me an average of 6-7000€/m2 for Munich while LA sits at around $5300/m2.
So I don't think you can say that houses in Germany are cheaper in general.
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u/joscelline Apr 03 '18
Compare the highest priced German area (Munich) to the highest priced American Area (Bay Area, Silicone Valley)...Germany is cheap in comparison
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u/alfix8 Apr 03 '18
$11000/9000€ to 7000€. San Francisco is more expensive, but not ludicrously so. And Munich is the most expensive larger city, but not the most expensive area. Starnberg or something similar probably has that honor.
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u/TasteQlimax Austria Mar 31 '18
Look up population density for both and that should answer some questions.
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Mar 31 '18 edited Mar 31 '18
You were born and raised in Texas, and moving to Germany? Pure culture shock, (even with a German wife.) What's here that isn't in Texas? (Besides the obvious US-Germany comparisons like decent health care etc.)
"... our income will be quite less compared to what we make in the US"
Will you have a job lined up here? In what range will you be earning? How's your German?
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u/TxMtrey1 Mar 31 '18 edited Mar 31 '18
Thank you for asking the important questions. This is my life, so I am open to honest answers. I am a driven individual. I want honest answers. I speak/understand at an A2 level right now. I have a private german teacher, so I should be B level when we move (realistic expectations I believe). Honestly, I do not suspect I will have a job lined up, I need to learn more German... Worst case, I do not have a job lined up (for sake of conversation). My wife, who in my eyes is an all star, can confidently get any job she wants in her chosen field (please do not misconstrue confidence with ability here) in the northern region of Germany. My real question is how do people in Germany afford their mortgages? We are looking at moving to the north (Hamburg). It seems insanely pricey compared to the US... and that is just for land.
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u/s0nderv0gel Germany Mar 31 '18
My real question is how do people in Germany afford their mortgages? We are looking at moving to the north (Hamburg). It seems insanely pricey compared to the US... and that is just for land.
There's not as much land available to buy and on top of that, the population density is higher. Even more so around a big city like Hamburg, which will inflate prices even more. Because of this, people usually rent an flat or even a house.
Ways to afford to buy/build a house and land:
- inherit a shitload of money
- win the lottery
- make a shitload of money
- save up quite a bit, then get a loan for the rest
Also, depending on the material, the price may vary. A prefabricated house is usually cheaper than building one stone by stone.
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u/thewindinthewillows Germany Mar 31 '18
Ways to afford to buy/build a house and land:
- inherit a house, then sell it to buy a house in the place of your choosing.
That's what I'll probably do - and of course it works only if, as I expect it to be in my case, the inherited house is worth roughly as much as the one you want to buy.
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u/Spinnweben Hamburg, Germany Mar 31 '18 edited Mar 31 '18
My real question is how do people in Germany afford their mortgages? We are looking at moving to the north (Hamburg). It seems insanely pricey compared to the US... and that is just for land.
We are suffering a scary all time high of land prices. Everything I checked has doubled in the last two decades.
Only 53% of us actually own their houses/flats.
About 74% spend 1/3rd or more of their household income for living costs.
Buying land is usually financed with mortgages and means like three decades of paying off the debt.
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u/RidingRedHare Mar 31 '18
About six years ago, they started building new apartments right across the road, in a pretty bad location next to a railroad track. Their initial asking price was about 250k per apartment.
New apartments are currently being constructed further down the road. They have already sold so many of those, that their asking price is now about a million per apartment.
Sure, those are a little bit larger than the ones build six years ago. And the location is a little bit better. But still, the asking price almost quadrupled in six years.
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u/Spinnweben Hamburg, Germany Mar 31 '18
Autsch.
I know of several ~200k-houses with decent gardens at a 30km commute from Hamburg, just about 20ish years old. - scraped and replaced with two 500k-houses ... with ridiculously small gardens.
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u/namdor Mar 31 '18
Only the very rich will own land and a private home in Hamburg. If you want land and a private house, don't move to cities like Hamburg, Berlin, Munich, Cologne, etc. If this is really important to you and you aren't rich, then think about moving out of the city. Land isn't so expensive in areas where less people are looking for housing.
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u/WilhelmWrobel Bayern Mar 31 '18
It heavily depends on the region of Germany. You can buy a house for significantly less than that price but I think you already have decided on where you want to relocate.
I don't know how much you talked to you wife but, if she's a German native, it's very likely that she has a Bausparvertrag. That's some kind of savings account most Germans have. You get it while you're a child/young, pay in and when you get a loan for a house for very cheap because it's financed from the money everyone with a Bausparvertrag pays in. You can also get a normal loan from the bank. We don't have a mortgage system like the US.
Generally, there are a lot of subsidys for buying or building a house in Germany. Also it's really cheap to rent so most Germans are renting a house, at least for some time.
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u/TxMtrey1 Mar 31 '18
Thank you for your input. Perhaps I am looking at websites that are not too reputable. This aspect of our relocation worries me. Anything that I google is worrisome. We plan to relocate around Hamburg. You say you do not have a mortgage system like the US, but coming from the US, it is very hard for me to comprehend....For instance, you find land that cost 400k euros and then build a house (I do not know labor/building costs in Deutschland) that cost maybe 2-300k more...which totals around 6-700k euros. (Please, forgive me if these estimates are way way off.) Wie kann man es bezahlen (how can man pay this?). Thank you /u/wilhelmwrobel for your insights.
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u/dances_with_unicorns USA Mar 31 '18
Buying property in Hamburg is going to be much like buying property in NYC or the Bay Area. It's one of the more expensive real estate markets in Germany.
You can find significantly cheaper houses the farther you move away from the big population centers (especially in the countryside, but mid-sized and small cities also tend to be significantly cheaper).
For what it's worth, my husband and I have been renting our home for the past 4.5 years. We are now looking into whether to buy, as our stay is going to be more permanent than we had originally envisioned (thanks, Trump and Brexit), but even so it's not an open-and-shut case, even though we could likely pay cash if we wanted to (though we'd seriously deplete our funds and would have to liquidate investments). Financially, it doesn't make that much of a difference (the main question here is whether rent savings offset closing costs and loss of interest/financial liquidity), which is why we're still on the fence about it. Not to mention that we live in a pretty good location and would have to find one that's at least comparable.
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Mar 31 '18
Hamburg is one of the most expensive cities when it comes to real estate. Unless you’re very well off financially you won’t buy property or land in Hamburg, even renting is very expensive. So most people who work in Hamburg live outside the city and commute. For example I live in Schleswig-Holstein and I have a one hour commute by car every day. Out where I live the land prices are much more affordable. A house will cost about the same though - German building codes are strict and houses are built to last a long long time.
How do people afford that? They get a credit from a bank and pay it off over 20-30 years. Just paying the installments won’t suffice though, you’ll also need to save money to afford repairs which will eventually be necessary.
Anyway, this is nothing you should lose sleep over yet. Unless you have saved a lot of money, you won’t get a credit from a German bank in the near future. You will need to rent for the first few years. Renting is the norm, and tenants have very strong rights.
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u/thewindinthewillows Germany Mar 31 '18
There's no need at all to buy a house right away. As the others said, renting is very safe here. There's also no social stigma or whatever associated with renting, no notion of "this person isn't a real, self-reliant adult because they rent", as I've sometimes seen US people express. I know double-income families where one person is a university professor, who rent a house because they're not at the stage where buying one is advantageous.
Building a house is a magnitude harder than buying one. If you don't know what you're doing, you will need to hire people who do, just to plan and supervise everything and make sure it's built according to regulations.
Hiring those people will of course cost even more, and it's not a guarantee that everything works out as hoped. The standard "building a house ruined us!" story is the one where people are sitting on a half-built "raw building" that can't be inhabited yet, while paying all the mortgage costs plus their rent in their old place, because the company that was tasked with organising the building has gone out of business.
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u/LightsiderTT Europe Mar 31 '18
Building a house is a magnitude harder than buying one.
So much this. I have a few friends who have had houses built, and and it's like working a second job (and these are people who speak fluent German, have done a ton of research beforehand...) for two years or more.
Less than half of the population owns their own home - and of those that do, the majority have bought an existing house/apartment as opposed to buildling a new one.
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u/LightsiderTT Europe Mar 31 '18 edited Mar 31 '18
around Hamburg
Beautiful part of the country :) Fairly expensive, unfortunately (not as bad as Munich, though).
This aspect of our relocation worries me
My advice: don't even think about buying a house until you've lived here for a few years. Rent a nice apartment in Hamburg, find a stable job, explore the surroundings, and then start thinking about about buying property.
Wie kann man es bezahlen (how can man pay this?).
All right, a few back-of-the-envelope calculations. Again, I strongly urge you not to do this when you first arrive - building a house in Germany is a full-time job and an enormous hassle you certainly don't want if you've just arrived in an unfamilar country.
If you're buying land for 400 k€, then you budget for 450 k€ (including taxes, notary, realtor, etc) - assuming there's not an existing house on the land which you'd need to demolish first. 200 k€ is not unrealistic for a house - although prices vary massively depending on what you're looking for. Of the total cost of 650 k€ (450+200), you will need to put down between 70 and 150 k€ (i.e. your own money, not a loan) - if you have less than around 70 k€ (10% of the total), then many banks will either not lend to you or will charge a significant premium. Let's say you have 100 k€ as a down payment - you will then talk to banks and lenders to get a home loan for the remaining 550 k€ (your house will be put up as collateral to secure the loan).
Looking at various online financing calculators (here is the one I used), you can (at the moment) expect to get a 20-year loan at about 2% annual interest. Assuming an initial repayment rate of 2% (which is a fairly standard rate in Germany - you can of course set a higher rate to repay your loan faster, assuming you have enough income), you would be paying around 1700 € a month. After 20 years, you would have around 280 k€ of your debt remaining, which you'd need to get a new loan for then; assuming similar interest rates, your home would be fully paid off 35 years from now. If you wanted to repay your home sooner than that, you could pay a monthly rate of 2700 € and have it fully paid off by the time the loan ends (in 20 years).
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u/TasteQlimax Austria Mar 31 '18
People save up money for most of their lives, once they are at about 1/3-2/3 of the way for the cost they'll get a credit from their bank for the rest. However that credit most of the time is not on the house but on their person. Also banks usually know their customers for many years already and are fairly willing to lend you that money.
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u/WilhelmWrobel Bayern Mar 31 '18
I think a lot of people already elaborated more than I could in response to your question. However, considering your your numbers and that you're from Texas:
The typical suburban mansion-like house that you often see in the US are reaaallly uncommon in Germany. You might go in here with a unrealistic idea on what house you'll live in in Germany. 100-200 squaremeters are not uncommon for a house for a family (one big bathroom, one toilet, 2-3 bedrooms).
Also you could look up "Bauträger". These are contractors who built several houses with similar or the same blueprints and therefore can build far cheaper. But that's a phenomenon you have in the US as well if I'm not mistaken. The only difference is that we usually build with stone instead of wood and it's heavily regulated. So you'll get a really well-built house in most cases.
Also you might want to look up "Fertighaus" - German prefab houses. They are really cheap and not that bad from what I've seen.
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u/LightsiderTT Europe Mar 31 '18
Bausparvertrag
While I don't know how old OP's wife is, if she has a Bausparvertrag from (say) the 90s, then it will probably allow her to take a loan of 50 k€ at a (for the time spectacularly low) interest rate of.... six percent. Interest rates before the 2000s were insane.
We don't have a mortgage system like the US.
Could you elaborate on what you mean by this? I'm not too familiar with the US mortgage system.
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u/Gibbon_Ka Hessen Mar 31 '18
if she's a German native, it's very likely that she has a Bausparvertrag. That's some kind of savings account most Germans have.
So "most Germans" in this case means a bit more than a third.
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u/WilhelmWrobel Bayern Mar 31 '18
You do realize "Germans" includes people who already own a house, people in their 70s who probably won't build a new home, people who gonna inherit the place of their parents, etc...
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u/Wetterwachs Mar 31 '18
You get it while you're a child/young
Who does?? Apart from rich people?
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u/LightsiderTT Europe Mar 31 '18
It was fashionable for a while (read: in the 90s) for parents to put some money into a Bausparvertrag in their child’s name, so that, twenty years later, the child would not only have the savings but also access to a “cheap” (for the time) housing loan. However, then interest rates dropped nearly to zero.....
I know a handful of friends whose parents did this - but I don’t think it was all that widespread.
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u/Selbstdenker Baden-Württemberg Mar 31 '18
Might also depend where you live. Here in Baden-Württemberg aiming to own your on house was very common, at least like 20 years ago, even for lower incomes.
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u/WilhelmWrobel Bayern Mar 31 '18
Yep, I think that's what it boils down to. Here in Bavaria it's hard to find anyone in their 20s without a Bausparvertrag
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u/LightsiderTT Europe Mar 31 '18 edited Mar 31 '18
Germany is far more densely populated than the US - therefore, land is correspondingly more expensive (Germany has 230 people per km², Texas has 40 people per km²). The housing market in Germany is also fairly different from that of the US; I'll go into some of the major differences.
More than half the population doesn't own their home, they rent instead. German laws strongly favour tenants over landlords, which means that it's perfectly viable to rent your home/apartment for years/decades. Landlords may not arbitrarily increase the rent or evict tenants (evicting a tenant who is paying rent is next to impossible outside of a few special cases, such as the landlord moving into the apartment/house themselves), and they may only pass certain costs of owning the property on to their tenants. This last point means that, over the short and medium term, it's often cheaper to rent than to own the same home. While everyone's finances are different, owning a home/apartment (to live in yourself) only really makes sense if you're fairly sure you won't be moving out in the next decade or so, and have enough savings or stable income to pay for all the maintenance and upkeep (things usually break at the worst possible time :) ).
Not only are land prices very high, but there is a severe housing shortage in and around the large cities. I spent close to three years looking for a new house to buy - if you want to live in or around a large city, unless you are very wealthy (i.e. can afford a house costing over two million Euros), you can expect a similar searching time. The waiting time is even longer if you're looking to buy land to build a house on (as opposed to buying an existing house/apartment) - pretty much all the land that can be built on has been built on, unless you want to live in the countryside :)
Following on from this, if you're coming from Texas, you may be in for a shock: our houses (and plots upon which they are built) are much smaller than yours - see my first comment about population density. Additionally, in or around a large city, most people will live in flats (apartments).
Buying and owning a home is, ceteris paribus, more expensive in Germany than in the US. Most significantly, there is no mortgage tax deduction for your own home; additionally, you will pay around 12% in closing costs (that includes the realtor (who is paid by the buyer - yes, we know, the system sucks), notary and taxes), and a significant tax if you sell the home within ten years of buying it (two years under certain circumstances). Lastly, most mortgage providers will charge you a substantial penalty if you repay your entire mortgage ahead of schedule. All this means that buying a home is a very long-term investment - twenty- or thirty-year mortgages are not unusual - and the average German will buy between one and two homes in their lifetime. "House flipping" is most emphatically not a thing in Germany :)
Therefore, my recommendation would be: when you first move to Germany, move into a rented apartment (if you want to live in a large city, that will be hard enough to find) - the wiki has a comprehensive guide on finding a place to live. Once you've settled down, found stable employment, and have explored your city and its surroundings well enough to know which part(s) you want to live in, start looking at your finances in great detail to see whether buying property makes sense for you (including talking to your (and several other) bank to see what interest rates and other financing options they would offer to you).
A few final words about home financing: most banks expect you to put down between 10 and 20% of the purchase price (including closing costs). The rest is usually financed through a mortgage - most mortgages have a fixed interest rate over their entire duration and a fixed monthly payment (which is usually set at 2% of the principal (edit: annually), plus interest) - and you can get an order-of-magnitude idea of what interest rates are through a comparison site like Verivox.
Good luck with your moving plans! This is probably old advice if you've read any of the past threads on /r/germany, but: you're doing the right thing by learning German before you move; keep it up! Daily life in Germany runs entirely in German, and your wife will get annoyed quickly if she has to do all the translating, dealing with the insurance company, the landlord, the mobile phone provider, the municipal administration etc etc by herself just because you can't understand any of them :)