Discount (new construction)

New-construction discounts refer to price reductions that property developers or project developers offer buyers to market residential units in a newly built or still-under-construction property. Such discounts are rarely communicated as traditional price reductions but are often provided in the form of additional benefits, such as complimentary special features, included parking spaces, or coverage of the real estate transfer tax. During periods of declining demand or rising interest rates, new construction discounts become significantly more important and can determine the success of a construction project.

Types of Discounts in the New Construction Segment

Discounts in the new construction sector are rarely presented as a direct reduction in the purchase price, as this would put pressure on the list price of the remaining units. Instead, developers use indirect forms: free fit-out packages (kitchen, flooring, bathroom upgrades) worth €10,000-30,000, coverage of parking space or underground garage costs, low-interest construction loans through partner banks, or coverage of real estate agent and notary fees. In addition, when sales slow down, so-called early-bird discounts or last-minute offers are sometimes offered for the final unsold units. All these forms are economically equivalent to a price reduction but have different tax and accounting consequences.

Legal and Tax Aspects

A discount granted reduces the notarized purchase price and thus also the tax base for real estate transfer tax as well as notary fees. If, on the other hand, additional services are agreed upon in a separate contract, it must be carefully examined under tax law whether the tax office will include these in the tax base (so-called “unified contractual object”). Buyers should ensure that discount terms are documented in the purchase contract or in a notarized supplementary agreement-verbal promises are worthless in the event of the developer’s insolvency. Features relevant to owner-occupancy also affect the subsequent depreciation basis in the event of a sale.

Identifying and Utilizing Negotiation Leeway

The scope for discounts in new construction depends heavily on the project’s status: During the marketing phase (before construction begins), developers are often reluctant to negotiate; as the project nears completion and units remain unsold, the pressure increases significantly. Buyers should analyze the market situation and specifically inquire about the “last available units.” Bulk buyers (investors purchasing multiple units) also regularly secure volume discounts of 3-8%. Important: A discount should never come at the expense of quality assurance-warranties under the Developer Contract (MaBV) must remain in full for the original purchase price.

New Construction Discounts and the Developer’s Obligations

An important legal aspect buyers should keep in mind: The Real Estate Agent and Developer Ordinance (MaBV) stipulates that payments from the buyer may only be called upon to the extent that construction actually progresses. This safeguard applies regardless of whether discounts or additional services have been agreed upon. If, for example, a developer provides a built-in kitchen as part of a discount package, it must be verified whether this item is billed separately or as part of the purchase price-and whether the MaBV guarantee covers the full amount, including the special services.

If discount services are governed by a separate equipment contract (which is not notarized), this portion of the agreed-upon service may be lost without recourse in the event of the developer’s insolvency. Buyers should therefore insist that all services be listed in the notarized purchase contract-or at least in a supplementary agreement that is also notarized.

Practical Tip for Homeowners in Nuremberg and Franconia

In the Nuremberg metropolitan region, several major new construction projects have stalled since 2022 because rising interest rates and construction costs have dampened demand. This now creates room for negotiation for buyers that did not exist before. We are observing in Nuremberg-South, Fürth, and the Erlangen-Höchstadt district that developers are offering package discounts of €20,000-50,000 in the form of furnishing vouchers or directly as a reduction in the purchase price.

Our tip: Let us check the list price in advance against comparable properties-that way, you’ll know whether an offered discount is actually a reduction or just a correction of an inflated starting price. Especially for new construction projects in Fürth-Atzenhof, Nuremberg-Kornburg, or the Roth district, where large-scale condominium developments-some with more than 50 units-are being built, pricing is often opaque. We analyze new construction projects and, as buyer’s agents on behalf of our clients, negotiate directly with the developer.

Frequently Asked Questions

Can I still negotiate a new-construction discount after the purchase contract has already been signed?

In principle, purchase contracts are binding. Subsequent changes to the purchase price are only possible if both parties agree and the adjustment is notarized. In practice, buyers have little bargaining power after the contract is signed, unless the developer deviates significantly from the agreed-upon construction work-in which case warranty claims may lead to a reduction in the purchase price.

Does a new-construction discount affect financing?

Yes. If the notarized purchase price is reduced, the loan-to-value ratio used by the bank also decreases. This can result in a higher loan-to-value ratio, leading the bank to offer less favorable terms or require a higher equity ratio. Those who receive discounts in the form of additional services without a reduction in the purchase price do not face this disadvantage-but should still have these services specified in the purchase contract.

Are discounts on new construction relevant for tax returns?

Generally not directly for owner-occupiers. Landlords, on the other hand, must note that amenities provided as part of a discount may increase the tax depreciation base if they can be proven to be part of the building’s value. An assessment basis that is too low can lead to additional taxes later on when the property is sold. Consulting a tax advisor is highly recommended in this regard.

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