In an op-ed in FAZ, PhD graduate Julius Stoll explains Germany’s high real estate commissions – and how to bring them down.
Despite reform – and even because of it – real estate brokerage fees in Germany are among the highest in the world. In an op-ed in the German newspaper FAZ from 29 January, recent Hertie School PhD graduate Julius Stoll explains why, and what can be done about it, drawing from his doctoral dissertation research.
In the article, Stoll highlights three oddities about German real estate brokerage fees:
- Commission rates in Germany are higher than countries with similar real estate prices. In England and the Netherlands, for instance, brokers receive one to two per cent of the selling price; in Germany, they receive four to six per cent.
- Commissions in Germany are uniform regardless of the real estate for sale. “Brokers often charge the same rate for a two-bedroom apartment in central Berlin as they do for a country estate in Thuringia,” says Stoll.
- Commission rates have remained constant over the past 20 years, despite fluctuations in real estate markets. This is surprising, argues Stoll, given that digitalisation was expected to reduce brokerage costs.
Government reform from 2020 has failed
To turn this trend around, in 2020 the German government enacted a law that only allowed sellers to pass on half of the brokerage fee to their buyer. This was supposed to motivate sellers to negotiate and consequently bring down commission fees. However, according to Stoll’s research, the opposite happened: brokerage fees went up. Moreover, Stoll’s survey of 1,062 real estate agents after the legislation took effect found that 85 per cent of sellers do not negotiate prices.
Stoll concludes that legally splitting brokers’ commissions between sellers and buyers seems to have “formalised sellers' passivity”. To resolve the problem, he argues that Germany should follow other countries’ examples and introduce a system in which sellers alone bear the burden of the commission. “A seller-only commission system reduces bureaucracy and is internationally proven: all countries with low commission rates have seller-only commissions,” he writes.
Read the full article in German in Frankfurter Allgemeine Zeitung or read more about his dissertation on real estate reform in Germany.
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