Germany’s strong real estate market makes it a desirable destination for investors

By Aykut Elseven 

As a popular immigration destination, there are few countries as liberal as Germany when it comes to the purchase of real estate by foreigners. Both a person and legal entities, from any origin or citizenship, are permitted to acquire German real estate. In comparison to other countries, this is a major advantage for foreign investors, as they can invest directly in the German real estate market without bureaucratic difficulties.  

Increasing real estate prices

Nowhere else in the European Union are real estate prices rising more sharply than in Germany. According to experts, this development is attributable to the monetary policy of the European Central Bank (ECB) and the move to the big cities. For example, the ECB's zero interest rate policy makes financing cheaper. However, the low interest rates continue to make investment opportunities less attractive. The result is that much more is invested in real estate. Even from abroad, a lot of money flows into German real estate. Large cities such as Berlin, Munich and Hamburg are particularly attractive for investors. 

Even though people warn about a price bubble on the housing markets of German metropolitan areas, rising prices for condominiums don’t seem to change anytime soon. After all, people will continue to move into prospering metropolitan regions. The dynamic price development on the real estate market will most likely continue, according to a recent survey of 600 real estate experts in Germany. They expect prices to rise by 3 to 5 percent by the end of the year.

Does Germany have a Golden Visa program? 

Golden Visas grant citizenship or resident permits in exchange for money from third-country nationals. Such programs already exist in 14 EU member-states. Transparency International and Global Witness, when presenting their report in Brussels, called for more transparency and caution when issuing such visas. Valid and binding rules throughout the EU are needed. At least 6,000 passports and almost 100,000 resident permits have been issued in the EU in the last 10 years. The European Commission has called on the member-states to exercise more restraint in trading passports. 

In Germany, there is basically no possibility to obtain a resident permit or even a German passport by investing in state funds or by buying real estate. However, there is a possibility to obtain a resident permit in Germany for wealthy applicants. This right results from special permission according to § 7 AufenthG. The court case law in recent years has regularly argued in favor of granting a resident permit for wealthy foreigners who wish to settle in Germany. 

The applicant's assets 

The most important factor here is the client's assets. The exception, according to § 7 AufentG, can only be applied to very wealthy clients. In addition, the client has no legal claim. This is a discretionary provision in which each individual case is examined separately by the authorities. 

It is generally agreed that a wealthy foreigner who comes to Germany to live from his or her assets is one of the cases of the act's applicability in which the granting a residence title is required. Among the possible sources of income are both rent amounts and interest from pure capital investments. Contrary to the previous assumptions of the authorities, real estate in particular — for example, the ownership of real estate — represents a sufficiently secured asset. Compared to bank balances or share deposits, it is not affected by losses in value on the financial markets. 

It only depends on whether the property in Germany in the form of real estate, bank capital or share deposits, or any claims as a whole, is sufficient to secure the livelihood of the person concerned in the long term. If children live in the household, their suitability for securing their livelihood must also be taken into account. Already with an annual income of 42,000 euros net, a residence title is granted in some cases. Even with a pension of 1,107, to which a permanent claim exists, the conditions for granting a resident permit were accepted. However, care must be taken to ensure that these decisions were taken on a case-by-case basis by the court. In principle, it should be assumed that rather higher assets must be available in order to be able to successfully rely on § 7 AufenthG.     

The purpose of permanent residence 

The main purpose of the application for a resident permit must be to live in Germany in the owned property on German territory and to have an annual income of minimum 42,000 euros net. Thus, the possibility is offered to acquire a real estate in Germany in order to receive a residence title, according to § 7 Abs. 1 S. 3 AufentG. However, only the acquisition of real estate alone does not automatically residence title not obtained at the same time. The prerequisite is that the applicant is wealthy enough and has enough assets to secure his or her livelihood.  

The German Investor Visa Option 

Germany also has a different option for the investors who don’t want to purchase real estate but want to earn a resident permit through self-employment activities in the country. Many choose to incorporate or start companies and receive the investor visa according to the § 21 Residence Act. 

Under § 21 AufenthG, non-EU nationals can obtain a residence permit for starting a business. There is no minimum investment amount, however, the business needs to fulfill the needs of Germany by having a beneficial economic impact and the start-up costs need to financially be covered by the investor’s own capital or a bank loan.

To ensure the sustainability of the business, authorities are also considering the viability of the business plan, the investor’s relevant business experience, the amount being invested in Germany, the impact of the business project on employment, and how the company will contribute to innovation and research in the country.
 

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