The impact of condition and environment on the letting and selling transaction process in the German residential market - an empirical study

Abstract

Whilst market prices and rents in residential property are largely governed by the economics of supply and demand, the impact on market price, of the condition and environment of individual or even entire residential blocks of properties is hugely affected by buyer and tenant perception. This is may be enhanced by their professional advisors together with their specialised knowledge of the property sector. The causes behind perceptions are manifold; these may range from poor maintenance, an unfavourable layout of the property, flats in an upper floor without an elevator, flats without balcony, high ancillary expenses, poor energy efficiency, a high percentage of migrants in the neighbourhood, noise from a nearby road or railway lines, poor infrastructure, and occasionally to the exposure to overhead power lines, wind farms and similar, to name but a few. These factors may be so severe that they can create a property stigma which will affect its marketability. The purpose of this paper is to examine the awareness and acceptance of potential buyers or tenants to these factors, and how they might impact on the buying or letting decision. The role of the property professional and their duty to reveal expert knowledge in the transaction process is also critically examined This study, which focuses on residential properties in Germany, will hopefully provide a greater understanding of consumer behaviour in the residential property market in relation to condition and environment. This paper is based on a new survey carried out by the author in spring 2012