Home Affordability in Germany: Some buyers can now afford up to 24% more house

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Dr. Christian Mulder

Dec 21, 2020
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Berlin, 21. December 2020 --- Dr. Chris Mulder, Hypofriend Co-founder, sees no stop to house price increases: "Many of our clients expect that they can afford more house as a result of reduced agent fees in the revised law on real estate commissions and we agree. With interest rates low, and limited supply house prices will keep rising, despite Corona."

A new law that takes effect on Dec. 23 will change who pays the real estate agent commission. /1 In states like Berlin and Brandenburg, sellers don't currently pay a dime when selling their real estate through a broker, and buyers pay the full 7.14%. 

Going forward buyers will pay a maximum of 50%, or 3.57%. The same holds true in Bremen, Hamburg, and Hessen, although the fees are relatively smaller.

We have surveyed over 575 potential buyers to find out what they think will happen. Here are the results:

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Almost half (47%) of actively looking buyers think that they can now afford more house. Right now they have limited savings. Their income is good, but in Germany homebuyers need an enormous amount of savings to buy their first home to pay for the sizable purchase fees.

The new law means that fees go down for buyers and hence they would need fewer savings. As a result, half of the potential buyers think they will be able to afford a larger or more expensive house. And buyers are right. Even those with larger savings and aim for favorable interest rates will benefit.

Nonetheless more than half (55%) of the buyers think they will not gain directly from the reduced fees. They expect that sellers will offset their cost increase with a higher purchase price and that buyers hence not benefit in the form of reduced cost.

Buyers want to see real deep cuts in the overall real estate fees. Over half of the respondents think the fees should be capped at 2%, and another 20% think that 3% is high enough. Just a mere 5% of respondents would like to keep the current national maximum (7.14% when VAT is 19%). 

Buyers can look with envy to some other countries, where real estate agent fees are indeed much lower. Real estate agent fees in efficient markets like the UK and the Netherlands are 1.42% resp 1.38% on average including VAT. This amounts to about ⅕ of the maximum fees in Germany. Germany is more or less at the top (or should we call it a bottom) when it comes to real estate agent fees. 2

German homeowners could potentially benefit massively from examining the practices in high-efficiency countries. And the overall economy as well, as lower fees means more mobility and flexibility of people to move around the country. Moreover higher homeownership could help people save for old age and reduce poverty among older people that face ever-increasing rent payments and pensions that do not keep up.

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Dr. Christian Mulder

Dr. Christian is a former Senior Economist and Manager at the IMF and World Bank. He is a Hypofriend Co-founder.

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