Angebots- und Transaktionspreise von selbstgenutztem Wohneigentum im Ländlichen Raum

Asking prices and sale prices of owner-occupied houses in rural regions of Germany Many indicators and indices related to real estate markets are based on either asking prices or sale prices of properties. This research aims to enlarge the existing body of knowledge in this area by analysing the empirical relationship between the asking prices and sale prices of owner-occupied residential properties. Both data sources – asking prices and sale prices – have pros and cons in terms of the four criteria of real estate market data quality: availability; the extent to which they are up-to-date; accuracy; and geographical coverage. Asking prices are usually available at no direct cost from newspapers or brokerage web sites, or are collected by specialised data providers. They mainly feature very high geographical coverage, due to their abundance, and are generally available in real time. However, the great disadvantage of asking prices is insufficient accuracy: the asking price is rarely the same as the agreed sale price. In most cases this variance must be estimated and proper allowance must be made for it. Sale prices in real estate markets are generally (though not always: e.g. sales between relatives) at arm’s length and therefore provide the highest possible accuracy. They are virtually available in real time, similar to asking prices. Their geographical coverage is more than sufficient since, in most countries, every sale contract is officially recorded. However, in Germany (unlike other countries) sale prices are seldom made available, even for academic research purposes. This work aims to analyse these two data sources jointly and to quantify the divergence (discount) that applies to asking prices. Significant factors influencing asking prices and sale prices should also be identified. The main result is a better understanding of asking prices, due to their importance for real estate market analyses. The research provides unique new insights into the selling behaviour of private residential property owners. For the first time in Germany, asking price discounts were identified and analysed from a larger sample of primary data. The initial data set comprises 1,274 transactions in owner-occupied residential properties in rural areas of Rhineland-Palatinate (Germany). The study analysed every sale contract (N=6,597) for owner-occupied houses (not apartments) in this area between 2007 and 2009. In the end, 20% of all sale contracts (n=1,274) could be matched with asking prices. An OLS regression analysis is applied to identify significant variables. The regression model is mainly derived from similar US studies. It was found that, on average, sale prices are on average minimum at least 15.2% (20,605 €) below the stated listing prices. The skewness of the absolute and percentage asking price discounts reveals that absolute discounts increase with the total amount of the asking price, whilst the percentage discount is independent of the total amount. For most properties, the discounts fall within a relatively small range, although the total range is very large. The result is a very high kurtosis value for absolute asking price discounts. The pattern of the percentage asking price discounts is similar, but less distinctive. Another factor noted is that 10% of the sellers were forced to reduce their asking prices by more than 33.3% (on average 47,750 €) before a transaction could be realized. This indicates that many vendors overestimate the value of their own properties, especially in illiquid real estate markets. In particular, vendors of properties with high asking prices (over 300,000 €) often had to accept substantial discounts in both absolute and relative terms. Several other studies from the USA or Canada have come to similar conclusions. This indicates that such properties are particularly hard to sell in the investigated area. The OLS regressions included 31 variables, for which the secondary literature suggested would have a significant impact on asking price discounts. It is shown that no linear relationship exists and that asking price discounts cannot be forecast by applying the given models that relate to previous research in nonrural areas of other countries. Further, it could be assumed that many vendors of owner-occupied houses do not acknowledge differences between the cost of construction (i.e. including land) and the market value of their homes. The gap between cost and value is particularly evident in less sought-after areas. In contrast to other studies, this work concludes that the difference between asking price and sale price is not related to demographic, economic or most location characteristics. It is assumed that these results are mainly related to the structure of settlements in the investigation area. Market mechanisms in rural areas with small villages and medium-sized towns appear to differ markedly from those in larger cities. In the course of this study it became clear that mere asking prices suffer from natural limitations especially when – as is common practice in the industry – extracted electronically from given websites. Firstly, it is difficult to match the asking price and sale price of a particular property because there are often several different asking prices for the same property. Secondly, the time-on-market and any changes in the asking price are unknown factors that are, however, important in determining the sale price. The same issues applied to major property characteristics, such as the age of the building and the quality and quantity of fixtures and fittings. The results of this study are further discussed with researchers and the data provider of asking prices, ImmobilienScout24. They provide an effective starting point for further research.

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