Munich: foreign buyers heat real estate prices

Residential property in Munich has long been the choice of wealthy Germans and now is beginning to attract more attention from foreign buyers, which contributes to higher prices. Over the past 2012 luxury property in Munich has risen by 9.3%. According to Knight Frank, the rate of growth is much higher than the figure in other major European cities. The total amount of transactions in Munich for the year grew by €0.6 billion (€9.9 billion in 2012; €9.3 billion in 2011), informs Property Wire.

Wealthy citizens from Russia, the UK and the Middle East are the main buyers in Munich. The most preferred shopping areas are central: Altstadt-Lehel, Glockenbach, Schwabing and Maxvorstadt.

The average price for properties in Munich is about €4,200 per sq.m. Luxury housing is estimated at an average of €15,000 per sq.m. The biggest demand is for houses and apartments in the center of Munich (maximum within half an hour walking speed from the center). Also the demand and prices for new homes in other areas are increasing (for example, Nymphenburg). Old houses in the area Pasing are equally popular. Best offers are buyng within 2 weeks after their "start" on the market. Experts point to a possible increase in prices of luxury properties by 5-10% in 2013.

Despite the low level of GDP growth (forecast for 2013 - 0.5%), experts are looking positively to the market. The residential sector in Germany is in good condition and compares favorably with other EU countries. The conservative policy of German banks in respect of loans for real estate and the fact that just under 50% of German households have their own homes have helped to reduce the negative impact of the global crisis after 2008. In the post-crisis period residential property prices in the eurozone fell by 8%, while in Germany rose by 7.4%. The prices in Munich are among the highest in the country. For comparison, 1 sq.m. in Frankfurt cost €3,100, in Berlin - €2,100.

Munich is developed tourist center. Each year the city is visited 5.7 million tourists, while the indigenous population - only 1.4 million. According to Kate Everett-Allen, expert of Knight Frank, about 5% of customers who buy Munich's real estate worth more than €2 million come from Russia or the Middle East. The interest of buyers from Kuwait, Saudi Arabia and Qatar caused by, in particular, a high level of medicine and a large number of Munich perfectly equipped hospitals.

Amount of taxes depends on the location of the object. First of all buyer must pay a one-time tax on the purchase of land (Grunderwerbsteuer). Prior to 2007, all lands operated a single tax rate (3.5%). Since 2007 every province has a right to their own duties. The tax in Munich remains at 3.5%, in Berlin and Hamburg - 4.5%, in Düsseldorf - 5%.