Electronic Real Estate in Europe

View and Contrast of the Approaches of Germany and United Kingdom


Master's Thesis, 2007

76 Pages, Grade: Merit


Excerpt

List of Tables

Table 1 – Development of the Real Estate Websites as at April 2006 (Obermann, 2006)

Table 2 - Website Evaluation concerning Web design and Usability

Table 3 – Website Evaluation concerning Web design and Usability (Bradley, 2007)

Table 4 – Contrast of German and United Kingdom Market Development & Leadership

Table 5 - Contrast of German and United Kingdom Market Web Design Evaluations... 60 Table 6 – Traditional and Online Marketing in Germany and United Kingdom

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

List of Figures

Figure 1 – Prices in % compared to previous year (Walter & Just, 2006)

Figure 2 - German Internet User in Millions (ARD, 2005)

Figure 3 – House Prices in Europe (Just, 2005)

Figure 4 - Percentages of Internet Users in United Kingdom (Office for National Statistics, 2006)

Figure 5 – Results of Internet Marketing for Supplier Purposes (Immo Media Consult, 2002)

Figure 6 – Internet User who moved in the last 12 Months as at May 2006(Hallmann & Langer, 2006)

Figure 7 – Number of used Real Estate Websites in 2002(Immo Media Consult, 2002)

Figure 8 – Percentage of sales channels and utilised budget (Immo Media Consult, 2007)

Figure 9 – Page Impressions of selected Real Estate Websites (Immo Media Consult, 2002)

Figure 10 – Use of Real Estate Websites (Immo Media Consult, 2002)

Figure 11 – Percentage of contract conclusions with customers through the Internet (Immo Media Consult, 2007)

Figure 12 – Homepage of the website immobilienscout24.de .. 34 Figure 13 – Homepage of the website immonet.de... 35 Figure 14 – Homepage of the website immowelt.de . 36 Figure 15 – Homepage of the website of Engel & Völkers . 37 Figure 16 – Homepage of the Website of LBS

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

Figure 17 – Homepage of the Website of Atisreal . 39 Figure 18 – Top Websites in United Kingdom based on Visits in 2007 (Hitwise, 2007). 43 Figure 19 – Homepage of the Website of Primelocation.co.uk . 45 Figure 20 – Homepage of the Website of Findaproperty.co.uk . 46 Figure 21 – Homepage of the Website of Propertyfinder.co.uk 47 Figure 22 – Homepage of the Website of Homesonview.com... 48 Figure 23 – Homepage of the Website of Rightmove.co.uk... 49 Figure 24 – Homepage of the Website of Vebra.com 50 Figure 25 – German Online Real Estate System . 55 Figure 26 – United Kingdom Online Real Estate System 56 Figure 27 – Internet Readiness Levels (Chaffey, 2006)... 62 Figure 28 – Marketplace Channel Structure (Chaffey, 2006) . 63 Figure 29 – Comparison of radical and incremental Improvement (Amin, 2007)..

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

Acknowledgement

I would like to acknowledge the support and guidance of my supervisor Nigel Bradley.

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

Abstract

Over the last 15 years, the Internet industry has developed at the double. Hence, it is hardly surprising that the advancement of Internet caught up with the real estate in- dustry. Many critics have argued that the Internet is not incorporated yet into the daily business of the real estate industry. Moreover, these critics state that the potential is not exploited enough and many promises are unused. The analysis of the progress of two different countries in Europe may be valuable to provide a summary concerning the evolution of the digital environment in the real estate industry.

The purpose of this report is to present the advancement and progress of the online real estate markets in Germany and the United Kingdom. Furthermore, it is the aim to contrast the consistencies and disparities. Finally, the different approaches of Germany and the United Kingdom will be highlighted and evaluated.

In order to secure an adequate methodology being used, a comparative case study is integrated and particular elements are shown and contrasted to form a picture of the situation of the online real estate market.

The results indicate the advancement of the German online real estate market. Al- though the online real estate industry was going fine over the last years, a definite lack of usability and information aspects is in plain view. Crucial website elements were left out all or part on certain online real estate homepages. Due to this characteristic the online advancement in Germany can be defined as underdeveloped. Moreover, the real estate market has stagnated over the last years regarding the price development. This fact is one of the reasons Internet and real estate is not attached the importance that it is intended to be.

In comparison, the United Kingdom shows strongly more advancement in the last years and due to that the level of Internet connected to real estate industry is fairly high. Additionally, the prices of real estate increased over the last years and a market turnaround is not foreseen yet. Consequently, it is attached more value to the Internet technology and the development is very much supported by the real estate compa- nies.

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

1. Introduction

1.1 General

The Internet as a communication medium is integrated in almost every process of to- day’s business. Barely one company can ignore the Internet technology. Hence, it is not astonishing that nowadays the Internet has a great impact on real estate transac- tions. The question that arises is whether the real estate business is ready for this technology or not. This affects the company side as well as the customer side. Eventu- ally both sides have to be familiar with the technology to accomplish the conclusion of the contract. Although many businesses still work the traditional way, which means the physical trade, the evolution obtains everyone. Still many companies deal their real estate avoiding the Internet. However the reality shows a different picture. More and more people get used to the Internet. Roughly everything is marketable over the Internet, so now people select the Internet likewise for selling or buying online or sim- ply just to get a picture of the market. Hence, the companies have to catch up and adapt to the market change.

The idea of integrating the Internet into real estate business has an important back- ground: it is imperative to increase the number of customers. Technologies like Inter- net help for instance smaller companies to reach customers all around the globe. An opportunity like this was unimaginable a few years ago. In detail it means that a real estate company needs at most premises an own or public server and is able to create a business on an entire virtual platform. Increasing the number of customers and de- creasing the costs through saving time and effort has a huge impact on the business development.

Although the online real estate industry has not reached an optimum level in Europe, several countries are pushing the development forward. Despite all this the process starts slowly. The change from a face-to-face business to a virtual commerce causes different dilemmas. Beside technical issues the whole selling and buying process has to be overworked and this costs vastly money and time. The change of business is influ- enced by economic resources, technological progress and meeting the customer’s ex- pectations.

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

Germany and the United Kingdom both show very active real estate markets. Given a comparative, high and dense population, the total volume of real estate transactions is fairly high. Additionally the residential properties are interesting for both sides and hence the trade among each other is very active.

Nevertheless, the online real estate markets of both countries could not differ more. In the German market almost every agent makes his own business. In the United King- dom in contrary most of the agents are incorporated in a combined network. Different approaches with different results.

What are the main differences of the online real estate industry and to what extent are these diverse approaches effective?

In order to highlight the crucial elements, the research is made up of several successive chapters: Firstly, Germany and United Kingdom are evaluated individually according to special criteria based on the review and a web design evaluation of the real estate websites.

Secondly, the results are compared and added with further aspects, in particular the disparities of the market behaviours and the use of information and communication technologies.

1.2. Objectives

The combination of prior mentioned elements contributes to accomplish the following objectives:

- To evaluate the advancement of the online real estate industry in Germany
The aim is to assess how far the online real estate industry in Germany is devel- oped and to what extent the user is supported and benefited when using the online gateway.
- To investigate the evolution of online real estate industry in United KingdomPage 10

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

Targeting the United Kingdom online real estate market, it is the purpose to find

out how the evolution of the market has conducted.

- To contrast the disparities between the German and the United Kingdom ap-
proaches of online real estate It is examined how a difference between Germany and United Kingdom exists and to what extent.
- To assert the potential of aspects used in the online real estate industry Finally, it is highlighted if there are certain usability features that are used by the real estate companies to support their online business.

In the following chapter a review of the backgrounds of United Kingdom and Germany is provided. This component highlights the essential characteristics of both countries and additionally illustrates the Internet background and the real estate structures in- cluding the impact on the market. Further on the methodology explains how the data was gathered and evaluated. The report concludes with the presentation of the results and observations.

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

2. Preliminary Context

2.1. Description of the German Territory and basic Characteristics

The country Germany compasses approx. 360,000 square kilometres (Country Watch, 2007). Situated in the middle of Europe, Germany borders the Baltic Sea and the North Sea, between the Netherlands and Poland, in the south of Denmark; the other border countries are Austria, Belgium, Switzerland, Czech Republic, France and Luxembourg (Central Intelligence Agency, 2007).

German population ranges around 83 million as of 2006. The capital and simultaneous the largest city is Berlin with about 3.5 million inhabitants (Country Watch, 2007). Germany is composed of sixteen federal states and with a density of 230hab/km2, one of the most densely populated countries in the world (Statistisches Bundesamt Deutschland, 2005).

The German gross domestic product amounts almost € 2 trillion in 2006 and is the third largest economy in the world. The GDP grew 1% in 2005 and 2.2% in 2006. The labour market conditions are difficult and creation of new jobs stagnates due to high regulatory hurdles. The unemployment rate is around 11.7% 2003 and 2004, and 12.9% in 2005.

2.2. The German Real Estate Market Situation and Development

2.2.1. Market Situation

In Germany are around 40 million accommodation units. 47% of the gross properties of private households are in residential buildings. The living space per inhabitant is 41m2 in West Germany, in East Germany today 38m2 after 27m2 in 1990. 70% of the accommodation units were built after the Second World War and almost 50% of all flats are in buildings with one or two flats. Just 10.5% are located in buildings with more than thirteen units. The home ownership rates in Germany are the lowest of all industrial countries. 45% in West Germany and 35% in East Germany are among the European average (Walter & Just, 2006).

Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

Moreover, Gondring (2006) stresses, that in the international contrast the ownership rates are low, even though empiric surveys show that over 57% of the tenants prefer home ownership just 42.8% of German households live in ownership. In comparison to other countries in Europe like Sweden the profitability of German private real estate remained constant while the profitably in Sweden explicitly de- creased. That acknowledges the stability of the German real estate market.

The real estate stock in Germany increased about 2% between 2005 and 2007. This corresponds to the European average (Just, 2005).

2.2.2. Price and Transaction Development

The German real estate market is considered underdeveloped. In comparison to other European countries Germany shows backlog demand. Prices of houses and flats have decoupled themselves from the international uptrend. Concerning the EU states like France and Spain the price of houses increased by double-digit percentages. In Italy the average increase of real estate prices was 9% p.a., while in Germany the prices stagnated on the level of the 90’s (Gondring, 2006).

Regarding the transactions Anglo-Saxon buyers are dominating the German real estate market. Since 1999 Anglo-Saxon investors bought approximately 650,000 accommoda- tion units. In most cases they bought huge portfolios.

The depressing price development of the market is shown in Figure 1. Portfolio rentals are increasing fractionally and rentals of new buildings are stagnating. Prices for con- dominiums decreased over the last years (Walter & Just, 2006).

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Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

14 12 10

8 6 4 2 0

-2 -4 -6

Price Condo (Portfolio) Price Condo (New Building) Rental (Portfolio)

1991 1994 1997

2000 2003 2006

illustration not visible in this excerpt

Figure 1 – Prices in % compared to previous year (Walter & Just, 2006)

According to Walter & Just (2006), the prices will grow at most moderate. In many places the market will stagnate. As a result of the new social system Hartz IV, the de- mand for smaller flats increased. According to the demographic trends in Germany the population shrinks. Parallel the demand for new real estate decreases.

2.2.3. Internet Development and eCommerce

Between 1997 and 2005 the people who used Internet in Germany has been multiplied by ten (Figure 2). In 2005 from the number of users were 37.5 million older than four- teen years. This conforms to 57.9% of the population. The development of Internet distribution increased continuously strong between 1997 and 2005. Averaged more men than women use the Internet but in the younger target groups the rate is almost balanced (51% men, 49% women).

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Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

illustration not visible in this excerpt

Figure 2 - German Internet User in Millions (ARD, 2005)

Online trade might have high impact on retail trade surfaces on a long-term basis. The eCommerce conversions in the here relevant B2C-Business grow in Germany very strong from a very small level (2000: about EUR 2 billion). The clientele and thus the offer in the Internet extended substantially, the majority of the Internet users utilize however the medium at present mainly to the information search. Long-term it is to be expected that for instance a tenth of the German conversions takes place „online“. With a just moderate growth in the German retail trade altogether the conversions in the B2C-Geschäft to 2010 should have exceeded the border of EUR 100 billion (Mitropoulos, Siegel, & Funk, 2001).

2.3. Description of the United Kingdom Territory and basic Characteristics

The United Kingdom is the second largest economy of the European Union and the fourth largest economy in the world. England as a part of the United Kingdom is lo- cated in the South East, bordering Scotland and Wales. As an element of Western Europe, the United Kingdom is 35km north of France, separated by the English Channel (Datamonitor, 2006).

United Kingdom has an area of approx. 245,000 sq km. The population is around 61 million habitants, whereas 50 million people live in England. The density amounts

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Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

117hab/km2 and the population growth rate is 0.275%. Capital of England and the United Kingdom is London with 7.6 million inhabitants (Greater London) (Central Intelligence Agency, 2007).

Moreover, United Kingdom is an important European economic power. The gross do- mestic product was almost € 1.5 trillion in 2006 and the real growth rate amounts 2.7%. Regarding the unemployment rate in 2006 it was 2.9% and the export rate was € 351 billion in 2006 (Central Intelligence Agency, 2007).

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Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

2.4. The United Kingdom Real Estate Market Situation and Development

2.4.1. Market Situation

The United Kingdom is Europe's largest real estate exchange. The investment market is estimated at the end of 2003 at £ 265 billion and it has recently seen its fair share of what US Federal Reserve Board Chairman Alan Greenspan called in a different context "irrational exuberance" with, for example, record levels of highly leveraged "buy to let" residential investment by private investors (Cookson, 2006). According to Dixon (2005), the real estate sector in the European Union comprised about 755,000 companies with 1.7 million employees. In the United Kingdom the sec- tor has 68,000 enterprises and 371,000 employees and a turnover of £ 31 billion.

The proprietary ratio, i.e. the portion of households who live in their own flats in United Kingdom, is 72%. Therewith United Kingdom is beside Spain the leader in Europe. Furthermore, the profitability of the British real estate market is explicitly decreased. This demonstrates a certain amount of instability of the market (Gondring, 2006).

Regarding the real estate stock, it increased between 2005 and 2007 about 2.2%. This figure matches almost with the German market and the other countries of Western Europe (Just, 2005).

2.4.2. Price and Transaction Development

The real estate prices in United Kingdom increased tremendously since the 90’s (Figure 3). In the beginning of 1995 the average house costs were around £ 51,000. Until the beginning of the year 2000 the prices climbed to £ 77,000. Today some middle-sized houses are sold for £ 150,000. Hence, the average growth rate over the last seven years was over 17% p.a. One can assume that this development is probably an over- statement and that therefore a heavy correction of the market is the consequence (Just & Hunter, 2004). According to Just (2005), many houses are overestimated by 20 – 30%.

Page 17

illustration not visible in this excerpt

Figure 3 – House Prices in Europe (Just, 2005).

The price development of the United Kingdom market over the last years was ex- plained to rising incomes and restrained building activity. However, this explanation was applicable until the year 2003. In the last four years the estimation led to a yet incalculable development of the whole market (Just, 2005).

2.4.3. Internet Development and eCommerce

Between 2001/02 and 2006 the number of Internet users in United Kingdom increased by one-quarter, from 48% to 60% (Figure 4). Almost six in ten (59%) Internet users over sixteen years went online every day, while 4% went online less than once a month. The most common location for Internet use was at home and for those who had no access from home the most common place to use the Internet was at work (46%). Use of Internet in United Kingdom is more common for young people and decreases with age. In 2006, 84% of people between 16 and 24 had used the Internet within the last three months, while 52% of people aged 55 to 64 did not use any Internet connection in that time (Office for National Statistics, 2006).

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illustration not visible in this excerpt

Figure 4 - Percentages of Internet Users in United Kingdom (Office for National Statistics, 2006)

2.5. Online Market Structure in Germany and United Kingdom

In both countries the online real estate market is built on different elements. In Ger- many two types of online real estate companies exist: The online company with an online presence and the agency with an online presence. In the case of the online company the whole business is the website, e.g. Immobilienscout24.de. Furthermore the companies Immonet.de and Immowelt.de are online companies. The other cases are agencies that support the functional business and the online business. Usually the online business came after the functional business was already established. Engel & Völkers, LBS and Atisreal are agencies with an online presence.

In the United Kingdom the online market has developed differently. In the case of Rightmove.co.uk the biggest agencies in the United Kingdom merged to use their abili- ties for an online presence. The whole knowledge and real estate offers are placed together in one database in order to reach a larger customer scope. This strategy is also used in the case of Propertyfinder.co.uk and Findaproperty.co.uk.

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Electronic Real Estate in Europe: Review and Contrast of the Approaches of Germany and United Kingdom

3. Methodology

The methodology that is used is based on the case study strategy. This strategy is based on suggestions of Robert K. Yin (2003).

This is portrayed in three steps. First the organisational and planning issue is consid- ered. Time management and opening up the data sources will perform the main roles. The next step will be the selection of the adequate case study. In fact, the comparative case study framework provides logic that emphasis qualitative data that can provide a rich context for interpretation with limited generalization (Yin, 2003). To evaluate the development of the online real estate industry in Germany and United Kingdom the comparative case study is an appropriate tool. Finally collection and analysis of data will be conducted. In practice the web design will be considered as well as a review of the most important market players of Germany and United Kingdom. This includes a determination of the customer’s benefits, the functionality and effectiveness of the websites. That means the data which is collected will be related to the effective use of online real estate business in Germany and United Kingdom. Additionally an evaluation of the different websites will be part of the methodology. Moreover there will be a determination of the effort that is spent to creating and using the online presence ac- cording to web designable issues on the part of the real estate companies. The con- crete procedures will be research through secondary data from the Internet and litera- ture and primary data through personal contact to online real estate people. Regarding the primary data a set of criteria will be used including different criteria like informa- tion design, usability and effectiveness (Foraker Design, 2005).

[...]

Excerpt out of 76 pages

Details

Title
Electronic Real Estate in Europe
Subtitle
View and Contrast of the Approaches of Germany and United Kingdom
College
University of Westminster
Course
Business Administration
Grade
Merit
Author
Year
2007
Pages
76
Catalog Number
V120082
ISBN (eBook)
9783640236879
ISBN (Book)
9783640239689
File size
4223 KB
Language
English
Tags
Electronic, Real, Estate, Europe, Business, Administration, Internet, Online, E-Commerce, E-Marketing, Property, Germany, England, Great Britain
Quote paper
Jan-Philip von Gottberg (Author), 2007, Electronic Real Estate in Europe, Munich, GRIN Verlag, https://www.grin.com/document/120082

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