Consumer Credit Directive makes it almost impossible for foreign investors to acquire residential property in Germany
- EU citizens from non-euro-countries such as the United Kingdom, Sweden, Denmark, the Czech Republic or Poland are affected
- These buyers do not obtain residential loans from German banks anymore
- Bypassing the regulation is possible but costly
Berlin 06 June 2016 – On 21 March 2016, the German implementation of the European Directive On Credit Agreements for Consumers Relating to Residential Immovable Property (Consumer Credit Directive) came into effect. The new law imposes stricter conditions on lending to private residential buyers. The core of the new legislation is that the banks have to examine their borrowers’ creditworthiness more carefully than before.
However, the law contains some conditions that make it difficult for borrowers from EU countries other than Germany to get a loan for the acquisition of residential properties in Germany. “This applies to private buyers from EU countries that are not part of the Euro zone such as the United Kingdom, Poland, Sweden, the Czech Republic and Denmark”, explains Uwe Bottermann, lawyer and founding partner at Bottermann Khorrami LLP, a Berlin-based law firm specialized in advising foreign buyers of German real estate.
To date, these buyers would relatively simply receive a Euro loan from a German bank. However, the Consumer Credit Directive intends to protect those buyers from currency fluctuations. According to the new law, the borrower can request the bank to convert the loan into the respective home currency if the exchange rate between loan currency (i.e. Euro) and home currency shifts by more than 20 percent to the borrower’s disadvantage.