The “client pays principle*”, housing markets that have been swept clean, new legal ordinances – 2015 was a tough year for many German estate agents. Stephan Bruns, Franchise Manager DACH with Porta Mondial AG and the Managing Director of Porta Mondial Düsseldorf, talks about success and survival strategies in a highly competitive market.
Mr. Bruns, according to a survey conducted by the Center for Real Estate Studies (CRES), shortly after the introduction of the obligation that the estate agent’s commission must be paid by the owner if he is the one who has contracted the estate agent’s services, hardly a single owner is prepared to pay as much commission as has hitherto been paid by tenants. What consequences is Porta Mondial drawing from that?
Stephan Bruns: “Our focus in Germany is clearly in the area of real estate for sale. We see lettings primarily as an additional service for our clients, so that in the case of investment properties, we also directly handle their subsequent letting. Or we seek suitable rental properties for clients wishing to sell, for their own use.
This is often the case with older property owners who wish to get rid of their property because the upkeep is becoming too difficult for them. In either instance, we have not had any difficulties to date with regard to reaching agreement with our clients on commission in accordance with our services. This however also has a lot to do with good service, and the resulting customer loyalty. We offer special terms to the owners of larger residential property portfolios.
* The recently enacted “client pays principle” says that the estate agent’s letting-related commission must be paid by the individual who contracts his services. Prior to this, that commission has always been paid by the tenant.
Owners frequently underestimate how high demand is, particularly in desirable locations, and are virtually swamped by enquiries. It then becomes difficult and, above all, very time-consuming, for private individuals to check the solvency and soundness of potential tenants. Our job is to continue selecting suitable potential tenants in order to minimise possible loss of rent, and to guarantee a homogeneous tenant structure. As qualified estate agents, thanks to our long-standing experience we are better placed to make an objective judgement, and can offer our clients not only more security but also more free time.”
The supply of properties for sale in NRW is tighter than it has been for years but at the same time, it seems as if the number of estate agents in the market has been increasing for years. In your opinion, how will the industry develop in the coming years?
Networks will become increasingly important for estate agents
“Consolidation will definitely happen. It will be increasingly difficult for individual estate agents to hold their own in the market. The days of “just” being an agent are long past. The service expectations of both buyers and sellers have become far more demanding. Professional property presentation online and in print, property valuation and market analysis, individual viewings, helping to arrange financing, and professionally produced floor plans are meanwhile standard elements of a good estate agent’s repertoire. In order to meet these demands, estate agencies have to make significant investments in terms of both time and expenditure.
In addition, owners want to be kept informed about the marketing of their property at all times. To do this nowadays, good client and property management software is an absolute must. Professional expertise, a good regional network, a good organisational structure, and an attractive, eye-catching brand image are the success factors which will continue to assert themselves in the market.
A change of generation in the estate agency industry
Local “top dogs” who benefit from a network that has grown up over many years will continue to operate in the market, provided that they also continue to satisfy the growing demands of their clients. What will cause problems for these companies, which are often managed by their owners, is if they go through a generational change. Because the company is largely built up around one specific individual, they rarely offer sustainable corporate value.
Both stand-alone estate agents and individuals who aspire to succeed to company ownership, will in future be joining regional, national and international real estate brands and networks, in order to retain their place in the market. Furthermore, certification of professional competence for estate agents will be required in future – something that is long overdue in my opinion. Since entering the market in Germany in 2010, Porta Mondial has always set great store by ensuring that all partners not only attend internal training, but have also received recognised training as estate agents approved by the German Real Estate Industry Confederation (IVD) and the Chamber of Commerce and Industry (IHK).”
What do you do differently from other estate agencies?
“Apart from our focus on professionally competent partners and employees, we set great store by our comprehensive service spectrum, our regional and international network, and the transparency of the service we provide to our clients.
We currently have 8 offices in Germany, five of which are in NRW (Düsseldorf, Essen, Mönchengladbach, Krefeld and Ratingen). NRW is currently Porta Mondial AG’s focus of expansion. The existing offices are a huge advantage both for us and for our clients because we truly put our network to good use.
Concentration on NRW and the holiday property market
Our offices in NRW are in regions which merge with each other in terms of demand. This gives rise to many demand and supply synergies. If our clients so wish, we will present their properties in all offices, so that apart from our real estate portals, we can also generate more demand with our individual regional websites, and thus find potential buyers for those properties quicker.”
You are one of the few estate agencies to offer foreign properties as well. What do your clients think about this service?
“Our roots lie in holiday properties. Porta Mallorquina was founded in Majorca in 2005. That company, which is now a subsidiary of Porta Mondial AG, has meanwhile become one of the Top 3 real estate companies in the Balearics. Following Majorca, the company expanded to Ibiza and Tenerife. 2010 saw Porta Mondial AG entering the German market with its first estate agency in Düsseldorf. At the beginning of September we celebrated our fifth anniversary there.
Right from the start, we integrated holiday real estate into our product portfolio. That starts with the website, complemented by window advertising, and extends to regional marketing activities. Aside from the increased attention we get because of the attractive property brochures featuring sand, pools and sunny skies, synergies are also generated by the different target groups.
For instance, owners who would like to sell their properties in Majorca come to us, as do clients who want to buy a property in, say, Ibiza. In both cases, we work with our local partners in the given regions so that we can offer our clients the best possible service.
Since 2014 we have also been offering holiday lettings of fincas and villas in Majorca through our new tourism brand Porta Holiday, which once again sets us apart from the “run of the mill” estate agency. Thanks to the synergies between estate agencies and holiday lettings we can provide our clients with competent advice – for instance about why a holiday property abroad can also be an interesting investment.”
You already have five offices in NRW. Do you see the capacity for more?
“Naturally, there is still a great deal of free capacity in NRW. Other brands are demonstrating just how intense this kind of market penetration can be, but we set great store by organic growth, competent partners, and licence regions that can easily be managed. As a next step, we want to ramp up our presence in NRW in Aachen, Dortmund, Münster, Cologne and Paderborn.
Of course, we are also looking at the German North Sea coast with its holiday regions, where we see great potential for Porta Mondial with regard to property sales in conjunction with holiday lettings via Porta Holiday.”