A broker platform
Here at REFIRE we've had plenty of occasion recently to ask ourselves - just how are all those brokers out there getting on in a time of such sparse transactions, when whole swathes of the population who might have been thinking of buying are now sitting back and taking a more 'distanced' view of the market?
In the German market for private residential transactions, volumes have plunged over the past year with the abrupt rise in interest rates, higher equity requirements, greater scrutiny of a borrower's ability to repay, the cost of living shock, and greater economic uncertainty. Many of the established broker groups, such as McMakler and Homeday, who had been hiring staff and independents on a large scale over the last few years, have since been shedding large numbers of those same people, with further layoffs likely.
Last year property transactions in Germany collapsed by 41% compared to the previous year, according to broker JLL. This year is looking probably even worse, with few brokers predicting any sort of recovery before next year at the earliest, if even then. In a recent interview, Ronald Slabke, the CEO of financial platform Hypoport said a form of market cleansing was now underway. "Many smaller brokers won't survive the price slide in the property market - which is a good thing for the market. The days are gone when it was enough to put a property up for sale and organise a viewing in order to charge a high commissions," he said. Brokers who are financially weaker, haven't adapted to the changes in the market and haven't invested in digital technologies for real estate brokerage are unlikely to survive, he said.
The barriers to entry to the brokerage business in Germany have traditionally been low, with thousands of independent brokers among the 29,000 registered brokers only occasionally actively brokering for a commission. But the job is no longer the fairly easy activity it once was, and with commissions now being shared between buyer and seller, independents are having to invest more to compete with the myriad new competitors on the market. Without a network and a digital platform behind them, this may prove a challenge too far, no matter the degree of local knowledge and contact address book.
French broker platform Safeti enters German market
The latest among a raft of new competitors looking for a slice of the lucrative German pie is the French broker network Safeti, drawn by what it sees as the potential in a market with the EU's lowest rate of owner-occupiership. After launching in Spain and Portugal, Germany is the third new market for the French group, which was founded in 2010 and turned over €210 million on €5.6bn in transaction volume across 26,000 concluded deals last year. It counts 6,500 brokers in its now four countries including already 60 active brokers in Germany - which it plans to increase to 200 by year-end.
Ingrid Livet, the head of Safeti Deutschland says, "With commissions of between 70% and 99% we can offer our members compensation which is well above market rates". The company doesn't plan to open regional offices, but instead work with home-based independents embedded in their local markets.
Safeti is the third foreign brokerage group to enter Germany this year. US giant Keller Williams is opening regional Market Centres in the biggest cities across the country, while Swiss group Neho is also expanding into Germany with its discount-commission model, starting with a concentration on southern Germany. It plans up to 100 brokers and franchisees over the next 30 months.
The Austin, Texas-headquartered Keller Williams is the world's largest real estate franchise based on agent number. As part of its nationwide German expansion, it recently teamed up with Berlin brokerage group Black Label as partner to form the backbone of its Berlin operations. Black Label boss Achim Amann said the Berlin group would draw in large numbers of previously independent brokers to join up with the Keller Williams CRM platform and profit from the benefits of the network.
The company has already been in Europe for some years, with market centres in 16 European countries, including Spain, France, Portugal and Turkey, where it kicked off in Europe in 2013. Around the world it has more than 1,100 offices across 50 regions, with more than 300 of those outside the US and Canada.
It counts more than 200,000 associates or representatives around the world, boosting its claim to be the world's largest real estate franchise. In France, where it launched in 2016, it now has about 3,000 brokers.
The company defines itself as a network broker, emphasising the opportunities for its representatives to access its proven international network. Swen Nicolaus said, "We are taking KW’s successful systems and models, which are based on 40 years of experience and continuous development by 200,000 associates, and making them available to the German market.”
Christian Hoffmann, who will be COO in the new business, says the difference between the KW business model and other classical franchise systems is the level of service provided by the company in handling administration, offering its technology platform and - importantly - extensive training and ongoing education.
Brokers can continue to operate under their own names, in contrast to most other franchising businesses, while fees payable to KW are said to be much lower, and more flexible in how they are structured. "In five to eight years we want to have a significant market share in Germany, on a par with or above that currently enjoyed by Engel & Völkers," said Hoffmann. Engel & Völkers is Germany's largest broker network.
Neho survey highlights dissatisfaction with German brokers
New Swiss arrival Neho recently commissioned a survey by YouGov of a representative 2041 adult potential homebuyers as to their attitudes to German brokers.
Not surprisingly for a study commissioned by a company who's here to challenge the status quo and 'interrupt' the market, the survey found that Germans find brokers too expensive, too intransparent, and provide a dissatisfactory service.
Sebastian Eraghi, the COO of Neho, said of the survey results: "Brokers in Germany are too expensive. The already high commission of usually over 7 percent, many brokers have once again increased at the beginning of the year. Buyers now often pay up to 8% of the purchase price to the broker. Here we see potential with our commission of 1.75% per party to meet the desire of customers for a cheap and good broker. In Switzerland, our commission fight approach has made us the market leader."
Describing his company's modus operandi, Eraghi said, "Customers want good transparent service at low cost. The industry should embrace that and use today's digital capabilities to provide customers with the highest possible transparency in the sales process. At Neho, we solve this via a seller cockpit: the customer can see at any time how many calls the agent has made, how many people have looked at the exposé and how many viewing appointments have been made."
Further findings from the survey were that the majority of respondents consider the professional competence of real estate agents to be 'good'. 44% of respondents consider real estate agents to be professionally competent, 19% do not think they are competent enough and 21% did not trust themselves to assess the competence of real estate agents.
"Real estate agents in Germany can learn from abroad. The marketing and sales processes in Germany are altogether too intransparent and inefficient. Customers want transparency about the services provided, as well as an affordable service. In recent years, real estate prices and broker commissions have risen without any improvement in performance, and this threatens to come back to bite German brokers," said Eraghi.
