Classic real estate slump as Germans get Euro jitters

By Kenneth V. Smith

FRANKFURT, Germany As the date draws closer for a unified European currency, Germans have developed the national jitters. The coming new Euro currency has led to widespread worry about a possible loss in the value of the German Mark and, among many other symptoms, has caused a glut of property for sale.

It's a classic real estate slump. Prices begin to drift downward, but owners don't want to lose equity and hold firm on their asking prices. Prospective buyers sense that prices are going to fall further and postpone buying. Consequently, Germany, with one-third the population of the United States, has an estimated 800,000 properties for sale today.

Most German real estate professionals are trying to do business as usual, cutting costs, and waiting for the market to turn. But, a growing minority have been watching developments in the United States and believe the Internet will become a powerful tool in marketing German real estate domestically and internationally.

One real estate broker and an Internet developer specializing in real estate applications are among the first German advocates of the Web. They believe that Germany today is where the United States was two years ago in using the Internet for real estate and mortgage banking.

Evi Penttinen-Hoffmann, a real estate broker based near Frankfurt, said there are "so many houses and commercial properties for sale and so much pressure on the traditional five percent commission that we are now down to three percent for most sales." She said the drop in commission income has led her to offer business consulting services to foreign buyers as a way to stimulate sales.

Although she has been using Internet e-mail for several years, Penttinen-Hoffmann only recently started a small Web site in German, English and her native Finnish. She is licensed to sell real estate in Germany, and she is a certified accountant in both Germany and Finland. She said her goal is to use the Internet to find Finnish companies that are opening offices and transferring employees to Germany.

"It's not very easy to open a business office in Germany if you don't know the laws and procedures," said Penttinen-Hoffmann, who has lived in Germany for 15 years. Before becoming a real estate broker, she worked as specialist in electronic fund transfers for the German branch of National Westminster Bank, headquartered in London.

In addition to targeting Finland with her Web site, Penttinen-Hoffmann said she plans to develop a referral network by e-mail with American Realtors. "Almost every German and Finn wants to own a flat in Florida or Arizona and I can put them together with an American broker who has the properties for sale," she said.

Frank Witte, a Web developer for Haus-Online near Munich specializing in real estate applications, said this sort of enthusiasm toward the Internet will soon be common among German real estate brokers. As happened in the United States, the first real estate Web sites in Germany are those of small companies and sole proprietors like Penttinen-Hoffmann.

"German real estate on the Web is today only as advanced as the United States was two years ago," Witte said. "Interactive Web sites in Germany are very rare," he said, "and it is even more rare to find a German site offering online commerce or loan applications."

Compared to Americans, the Germans are far more concerned about the security of an online financial transaction. "Germans do not believe the Internet is safe for commerce," Witte said. "This fear is much bigger in Germany than in the United States."

Most German real estate brokers who have a Web site are doing so for domestic marketing image rather than commerce, however there is a growing number of who are using the Internet for international transactions. The German domestic market is hampered by having only four million homes with access to the Internet, or about one third of the penetration in the United States.

"But, it is slowly catching on," Witte said. "Most German real estate brokers are sitting back and observing the Internet. They are watching the few German brokers who are already online and those brokers in other countries, especially the United States."

Witte said German brokers are reluctant to spend money to develop a Web site because they cannot predict the return on their investment.

"They think the Internet is interesting, but they cannot see yet how to make money," Witte said

He compared the Internet to the fax machine of a decade ago when there was another slump in the German real estate market. "The German brokers were very slow to buy a fax machine," he said. "Then there was a boom in the real estate market and everybody got busy and wanted a fax machine immediately. It will be the same with the Internet."