Investment properties

New build as a capital investment.

Property can be many things. A home. A tangible asset. Provision for later life. A building block of wealth.

Apartment building with brick and render façade, balconies and landscaped grounds

For investors there is a further question: how do you choose a property so that financing, rental income, tax treatment and long-term quality work together sensibly?

That is precisely what we concentrate on. For our investment properties we work exclusively with selected new-build apartments built to the Efficiency House 40 standard and carrying the German Sustainable Building Quality Seal (Qualitätssiegel Nachhaltiges Gebäude, QNG).

Because a capital investment should not merely look attractive today. It should still have good arguments in ten, twenty or thirty years' time.

Why new build with QNG?

Anyone buying an apartment as an investment is not only deciding on location, size and price. They are also deciding on future maintenance, energy efficiency, lettability, financing and the scope for tax planning.

A modern new build with QNG certification brings several of these factors together:

A high building energy standard
Verified sustainability requirements
Lower refurbishment risk Major works in the near term are less likely than with older existing stock.
Contemporary layouts and specification
Sound conditions for long-term letting
Possible KfW funding
Particular tax depreciation options Where the statutory conditions are met.

Bright new-build apartment with open kitchen, dining area and living space with balcony door

New-build apartment to Efficiency House 40 standard. Contemporary layouts, specification and energy performance.

More than the rental yield

Choosing a capital investment on the basis of the initial gross rental yield alone falls short.

What matters is what is actually left after financing, costs and tax — and what long-term prospect the property offers. With a QNG-certified new build in particular, tax depreciation can have a considerable influence on the individual picture.

That is why we do not look at investment properties in isolation by purchase price. We look at the interplay of property, location, letting, financing and the tax position available to the buyer.

Two routes to depreciation

Two forms of tax depreciation can apply to newly built residential property. Under certain conditions they may be used alongside one another.

Declining-balance depreciation

For certain newly built residential properties, declining-balance depreciation (degressive AfA) may be chosen instead of the straight-line method. Under the law as it currently stands this amounts to 5 per cent of the respective residual value per year.

As a result, depreciation is higher in the early years than under the regular straight-line method. One of the conditions is that the statutory periods for the start of construction or for acquisition are observed.

For investors this can be of interest because a larger share of the depreciable investment can be recognised for tax purposes in the first few years.

Special allowance under § 7b EStG

For new rental apartments, an additional special depreciation allowance under section 7b of the German Income Tax Act (EStG) may be available where certain conditions are met. It amounts to up to 5 per cent of the relevant assessment base in the year of acquisition or construction and in each of the following three years. Over that period this can produce additional depreciation of up to 20 per cent of the assessment base in total.

Particular conditions apply to new buildings whose planning application or building notification was submitted after 31 December 2022 and before 1 October 2029. These include the statutory cost ceilings and the requirements of the Sustainable Building Quality Seal.

Important

The special depreciation allowance does not automatically apply to the full purchase price of the apartment. What counts is the statutory assessment base and the buyer's personal circumstances.

Both can work together

A QNG new build becomes particularly interesting where the conditions for both declining-balance depreciation and the special allowance under § 7b EStG are met. Both forms may then be used alongside one another. This can mean comparatively high tax depreciation in the first years after acquisition.

And this is precisely where the picture of a capital investment changes. Because the monthly rent alone does not determine the outcome. The tax effect can also have a considerable influence on the investor's actual financial outlay.

Worked example

A simplified example shows the order of magnitude.

Simplified illustration. No assurance as to the amount or the recognition of such allowances in an individual case.
Floor area	70 m²
Purchase price	€350,000
of which depreciable building share, illustrative	€300,000
Assessment base under § 7b EStG, illustrative	€280,000
Declining-balance AfA in year one, 5 % of €300,000	€15,000
Special allowance § 7b EStG, 5 % of €280,000	€14,000
Possible depreciation in the first full year	€29,000

What that works out to

€29,000 possible depreciation in the first full year

€12,180 tax effect at an assumed marginal rate of 42 per cent

around €1,015 equivalent per month

This illustration does not yet take account of rental income, financing costs or other deductible expenses. The actual tax effect always depends on individual circumstances, on how the purchase price is apportioned, on the statutory conditions and on the tax treatment in the particular case.

A QNG new build can work quite differently in tax terms for an investor than a property for which these additional allowances are not available.

KfW funding can complement the financing

For climate-friendly new builds with QNG certification, subsidised loans from the KfW development bank may also be available. Under the programme “Climate-friendly new build — residential buildings”, subsidised loans of up to €150,000 per residential unit may be possible where the relevant conditions are met.

Such funding is tied to specific technical and contractual conditions and must be built into the financing in good time. Eligibility should therefore not be examined only after the purchase.

Who might investment properties suit?

New-build apartments of this kind can be of particular interest to investors who want to build property assets over the long term while making sensible use of the available tax structuring. That includes, for example, entrepreneurs, self-employed professionals, senior executives and other investors with a corresponding level of taxable income.

The higher the individual tax burden, the greater the potential effect of an additional allowance. But a tax advantage alone does not make a good property. Location, purchase price, achievable rent, financing, layout, demand and long-term prospects still have to add up.

The property has to convince first

A high depreciation allowance cannot turn a poor property into a good investment. That is why our selection does not start with tax. It starts with the property.

We assess investment properties in particular on location, lettability, apartment size, layout, energy standard, purchase price and long-term marketability. Only once that foundation is sound do financing, funding and tax considerations come into play. That is how individual advantages become a coherent whole.

Selected QNG new-build schemes

On Neubauportal24 you will find selected new-build apartments that are particularly suited to investors. Our focus here is exclusively on new-build schemes with QNG certification.

Depending on the scheme, different apartment sizes, locations and investment volumes are available. On request we can calculate, on the basis of your own key figures and before any particular property is chosen, what order of magnitude might make sense for you.

Which property suits your investment?

Neither the highest depreciation nor the highest quoted rental yield decides the matter on its own. What counts is the interplay: purchase price. Equity. Financing. Rent. Tax position. Investment horizon.

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Note on tax and financial information

The information and calculations presented here are for general information and illustration only. They constitute neither tax, legal nor investment advice. Tax consequences depend on personal circumstances and on the statutory conditions applicable at the time. The specific tax treatment should be examined with a tax adviser before any investment decision. Funding programmes and terms are subject to change.