Munich, Germany Real Estate: Emerging from Berlin’s Shadow

For so long, Berlin was Germany’s unrivaled beauty that attracted immense amount of attention from visitors of all stripes. In recent years however, Munich has quietly made its …

For so long, Berlin was Germany’s unrivaled beauty that attracted immense amount of attention from visitors of all stripes. In recent years however, Munich has quietly made its debut as one of Europe’s must-see places. When talking about their city, Munich’s residents like to quote Heinrich Heine, a poet whose words “Munich nestles between art and beer like a village between hills,” seem to ring true even now, 150 years after they were first written.

Munich’s resurgence as a cultural center and tourist destination have made it a rising star in the German real estate market. Buyers who are looking for safer and long term bets are investing. Compared to other similar markets in Europe, prices in Munich are relatively low, giving the impression that a property boom is around the bend.

About Munich

Munich is the third largest city in Germany and is the capital of Bavaria, the country’s largest state, which is located in the southeastern portion of the country. The city was rated as the most livable city in the world by Monocle, an upscale international affairs, culture and design magazine, in 2007. Quality infrastructure, a healthy economy, top-notch housing, low crime, tolerant politics and a well established media propelled Munich to the top of the 20 city list, according to the magazine.

Located on the River Isla, Munich boasts a population of approximately 1.3 million and is considered a gateway to the Bavarian Alps. The city features an award-winning airport, 90 theaters, historical buildings and churches, numerous museums and galleries and beautiful parks, and is surrounded by the scenic Bavarian countryside. More than 100 companies, including BMW and Siemens, have headquartered their businesses in Munich, according to Deutschland Online.

Munich hosts Oktoberfest, one of the world’s largest and most well-known festivals. During the 16-day event, visitors from all over the globe fill the city to the brim and collectively drink an astonishing 1.8 million gallons of beer, according to Der Spiegel, a German weekly magazine. In 2006, Oktoberfest had 6.5 million revelers and raked in $1.35 billion. This year’s Oktoberfest began Sept. 20 and runs through Oct. 5.

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Tourism continues to grow at a healthy pace, with 2006 registering a record number of 96 million visitors, out of which 87 million were there for just for the day, according to muenchen.de, the city’s official website. The same year, Munich rang up 1.9 million international visitors. A little more than one quarter of the foreign visitors were coming from the United States.

“The one certainty is that Munich cannot be copied. Its cultural character, its attractiveness to tourists, and its economic power combined with the great facilities, its excellent infrastructure and Oktoberfest make it one of the most unique places in the world,” said Peter Talkenberger, Director of Allgrund Ltd., a company whose main clientele is international buyers wishing to invest in Germany’s property market.

Munich, Germany real estate

Forbes magazine recently put Munich at number eight in its top 10 places to invest in real estate. Its high rank in quality of life surveys, its prosperity and its ample employment opportunities make it an attractive real estate investment, according to Talkenberger. “Real estate in Germany mostly follows employment and salary rates,” he said.

In top locations, real estate prices have shown as much as a 15 percent increase per year, according to Allgrund Ltd. Some of the most expensive neighborhoods in Germany, such as Grünwald, Schwabing, Nymphenburg, Haidhausen and Altstadt, are located in Munich. The most sought-after properties are refurbished apartments in old buildings. The city will invest 625 euros in residential developments by 2011 and 11,000 new apartments are expected to be built by 2013.

Some German cities, including Munich, are expected to see price growth, according to UK’s Royal Institution of Chartered Surveyors’ European Housing Review 2008. Munich registered a 6 percent price rise, the highest among the major cities.

The housing market in Munich, as well as elsewhere in Germany, is facing two main issues, according to the review. Higher interest rates have made borrowing more expensive, and in 2007, a 3 percent increase on VAT charged on new housing kicked in, dampening demand in the short term.

Buying real estate in Munich

There are no restrictions to foreign ownership of property in Munich. A passport and proof of funds or financing is usually enough to go to a notary with the seller. However, buyers who don’t live in Germany may need a legal representative to receive official documents in cases where they will not be sent overseas, Talkenberger said. “Unlike the UK, one notary could see the buying process through from beginning to end, including dealing with the land registry office and the tax office,” he said.

Rental incomes are taxed in Germany and owners have to file taxes every year. Not doing so may land one in quiet a bit of trouble. “The internal revenue office can take your property on seizure quicker than you blink,” said Talkenberger.

The next few years

Many see Munich as a vibrant, safe and prosperous city. It has made investments in infrastructure and has taken measures to ensure its economy remains stable, according to Allgrund Ltd.

“Some market prophets say that Munich will surpass Paris and London in the next five to eight years. That may or may not be the case, and it’s not even necessarily a good perspective, because Germany in general is not a property bubble country. However, there has always been a higher demand than the market offers in Munich. There is little reason to believe that this will change in the future,” Talkenberger said.

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