Little sympathy for German estate agents' strike action

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For most Germans it's already been the worst year in living memory in terms of strikes, with the travel season having been interrupted several times already this year by Lufthansa's pilots and the crews of trains on Germany's Bundesbahn. The longest train strike ever has just been resolved (for now), so Germans are used to real inconvenience and alternative planning to accommodate the brunt of the transport workers' dissatisfaction.

No surprise, then, that there was neither sympathy nor understanding for a threatened strike by a widely-reviled group of business professionals – the property brokers. The strike was scheduled for November 7th, but despite warnings by the brokers' association BVFI's leadership of the threat to the 'profession', barely a third of the association's own membership of 12,000 heeded a call to down their commission-earning tools in favour of solidarity with their brokering brethren.

Of those members who participated, only 30% voted for the action, 6% voted against and 64% abstained. The required two-thirds quorum failed to be met, and the call to arms was thus rejected by default.

BVFI believes that the proposed regulation will threaten the entire broker profession. “The draft legislation submitted by the government on the so-called mandating principle (Bestellerprinzip) will lead to the destruction of around 10,000 brokerage companies, meaning the end for one-third of all broker firms,” BVFI announced in its strike appeal. “At least another 10,000 jobs are on the line.”

Rival owners' and landlords' association Immboilienverband Deutschland IVD has also sought to distance itself from its fellow association BVFI's call to man the barricades, describing it as "absurd nonsense, and leading to the rest of the industry just shaking its head in bewilderment. The strike would simply damage the actually reputable brokers", according to spokesman Jürgen Michael Schick.

At issue is the so-called 'Bestellerprinzip' or the principle of "who orders, pays" – a reference to an imminent change in the law that will shift the burden of paying the commission on a leased or bought property onto the landlord or the seller, rather than the tenant or the buyer.

Given the low standing of the 'profession' of broker in Germany, support among the public as voiced in social media channels and Twitter has been understandably muted. There were calls for the strikers to go ahead and stay on strike for ever, and other less than encouraging exhortations.

Nonetheless, even groups like the IVD recognize that the new law WILL cause problems for many real estate agents across Germany. As it currently stands, about 850,000 rental properties are re-let each year with the help of a broker, which is around 40% of lease renewals. The number rises to around double that, or 80%, in tight markets such as Berlin, according to the newspaper Tagesspiegel. The new tenant typically pays the agent a commission of 2% plus VAT. From next year the tenant will pay the landlord, who will either pay the broker or may take on the whole process themselves, depending on their appetite for getting closely involved in tenant negotiations.

While getting a handle on exact figures is difficult, and the various lobbying organisations strive to outdo each other in estimating the damage caused to their constituents, the broker legislation is closely allied to the separate legislation being enacted by the government on residential rental caps, the so-called Mietpreisbremse. This stipulates that when existing apartments are re-rented, the permissible rent be limited to comparable local rates (Mietspiegel) plus 10%. This will take effect only after the federal states have enacted specific ordinances to identify regions with tight housing markets.

About 2m of the 21m rental apartments in Germany are supposed to benefit from rent control. According to the Ministry of Justice, tenants will save annual expenses of €850m through lower rent increases and the elimination of broker fees. Income losses for landlords from rent control are estimated at €283m annually - to which have to be added additional broker fees of €219m.

Swings and roundabouts. A messy transition period while the industry undergoes profound and permanent change is to be expected, at the least.