Monday, 16 May 2016

5% Increase in Property Management Fees in Germany


Three out of four property managers in Germany are planning to increase their fees in 2016. This is the outcome of a survey by the Association of German Property Managers (DDIV) http://ddiv-service.de/hp1/Startseite.htm. The aim is an increase of 5%. Preparing for any upcoming discussion (not only for this purpose) it is important for every property owner or future investor to understand the current market situation and price level for property management services. The development will most likely have impact on calculations.


Last year the Center for Real Estate Studies (CRES) https://www.steinbeis-cres.de/ performed a survey of property management service providers and their fee models and fee levels. They were instructed by three main organizations in the German property business: ZIA, IVD and BVI.

The purpose of the study was to determine the tasks included in the basic property management service and which tasks are considered out of scope thus triggering an extra fee either pre-agreed in the contract or offered as needed.
The study provides benchmark values for average fee and service packages for specified market segments with regional differentiation. The main market segments are

1.    Owners Associations (German: Wohnungseigentümergemeinschaften WEG);

2.    Rental Apartment Blocks;

3.    Commercial (business use) properties.


Due to the structure of the membership of the organizations sponsoring the survey the feedback the third group (Commercial) was only 7% of the returns on the questionnaires.
The following fee information is based on Germany wide averages; the regional differentiation is significant and will be provided in follow up articles.

1. Owners Associations

The average fee per apartment is mainly determined by the size of the property:
Units
€ per unit per month excluding VAT
99 units or more
17.10
50 to 99
18.37
20 to 49
19.67
11 to 19
21.34
< 10
25.58
The increase in cost with reduction in size of the number of owners is plausible as many tasks are the same with any owners association no matter how many owners, e.g. the annual meeting, and thus are shared between a bigger or smaller number of owners.

2. Rental Apartment Blocks

The average fee per apartment is mainly determined by the size of the property:
Units
€ per unit per month excluding VAT
60 units or more
18.01
31 to 60
19.53
12 to 30
25.00
< 11
22.47
There seem to be some idiosyncrasies in the comparison of the size brackets but the variances within the clusters are relatively big, e.g. in the 12 to 30 units segment it ranges from 15 € to 30 €. Some of this effect might be explained by the fact that small buildings are more likely managed by smaller property management businesses more eager for business.

3. Commercial (business use) properties

The average fee per unit is mainly determined by the size of the property:
Units
€ per unit per month excluding VAT
60 units or more
20,18
31 to 60
20,89
11 to 30
24.26
< 10
25.18
The sample for this segment was relatively small (7% of the returns).
Other interesting aspects are the rent management for condos and pricing for extra services. Detailed analysis for the market segments and regional aspects will be provided in separate articles shortly. Don't miss the follow-up and subscribe to this blog.


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