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Germany remains a tenant country.

Only 45 percent of the people in this country live in their own four walls, as few as in any other EU country.

Many tenants actually long for their own home: As the recently published “Dream Living Study 2019” by the building finance broker Interhyp shows, one in ten would like to buy an apartment or house soon.

On the other hand, 38 percent state that they would like to buy their own home but do not have the financial means to do so.

In the current phase of low interest rates, many prospective buyers could easily afford the running costs for interest and repayment.

The problem is elsewhere.

“The need for equity capital often exceeds savings and is the greatest obstacle to home ownership for many households,” states Bausparkasse Schwäbisch Hall.

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As a rule of thumb, buyers should shell out at least 20 percent of the purchase price and all ancillary costs out of their own pocket.

And these ancillary costs are tough: brokerage, real estate transfer tax and notary fees add up to around ten to 15 percent of the purchase price, depending on the state.

So if you want more people to own their own apartment or house, you have to start with the ancillary acquisition costs.

Politicians have also recognized this.

“Homeownership offers families a safe home and future-proof pension provision,” said Federal Justice Minister Christine Lambrecht (SPD) recently when she presented the housing and rent package approved by the federal government.

"We will noticeably relieve buyers of living space by reducing their brokerage fees when buying real estate."

Specifically, the cabinet decided that buyers should pay a maximum of half of the broker's commission in the future.

In many federal states this means a noticeable relief for buyers who previously had to shoulder the brokerage fee alone.

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It is all the more noticeable that another cost block remains untouched: the notary fees.

When asked, the Federal Ministry of Justice stated that it was the aim of the federal government to reduce the ancillary purchase costs.

At the moment, however, there are no specific efforts to change anything in the notary fees - also with regard to the fact that these make up the lowest proportion of the ancillary costs.

Do the notary fees have to be linked to the purchase price?

However, this proportion is not quite that small.

According to the Institut der deutschen Wirtschaft (IW Cologne), the notary fees averaged around one percent;

at a purchase price of 400,000 euros, they make about 4,000 euros.

"The question arises as to whether the fee really has to be linked to the purchase price," says Michael Voigtländer, head of the financial and real estate markets competence field at IW Cologne.

Because real estate prices have risen significantly in recent years, the notary fees have also increased accordingly - although the effort for the notary has not increased.

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The IW Cologne already showed in 2016 that it can also be cheaper.

According to this, property buyers in the Netherlands transfer an average of only 0.3 to 0.4 percent of the purchase price to the notary, whereby the notary costs are independent of the purchase price.

In Great Britain there are no such expenses at all, as there the transfer of ownership can take place without a notary.

All that is payable is a fee in the per mille range for entry in the land register.

In Germany and other countries, this is due in addition to the notary fees.

"Therefore, there is a tendency to question why competition is no longer allowed in Germany," says Voigtländer.

However, the example of Switzerland shows that even with a state-regulated notarial system, lower fees are possible than in Germany.

In the Confederation, the amount of the notary's fee is a matter for the cantons, with the rate being well below one percent and then usually divided between seller and buyer.

Conversely, however, it can also be considerably more expensive than in this country.

In Austria, for example, according to the Immobilienscout24 portal, the costs are between one and three percent of the purchase price, which is significantly more than in Germany.

And how does the Federal Chamber of Notaries see it?

There is nothing to suggest "that a deregulation of legal activities in the real estate market in the EU would lead to a reduction in costs for the consumer or to an increase in efficiency," she said a long time ago.

In doing so, she referred to a study of the cost structure of property transactions in several countries.

According to the Chamber of Notaries at the time, this investigation also showed that in Great Britain and the USA, where the involvement of a notary is not required, “the reliability of the land register data is not guaranteed, so that the risk of legal disputes is increased”.

Blockchain could make notaries unnecessary

However, the notaries can be quite relaxed.

Because while interest groups and politicians criticize the amount of the brokerage commission and the property transfer tax again and again, hardly anyone questions the notary fees.

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At the beginning of 2017 there was a draft of a paper circulating in the SPD, which demanded with regard to the notary fee when buying real estate: "Since this is a standard service, we want to legally stipulate a flat rate for the purchase of self-used living space in the future."

Ultimately, however, the SPD parliamentary group decided on a much more non-binding formulation: "We will relieve families and normal wage earners with additional costs that arise when buying a property."

For the FDP, too, the notary fees are not on the top of the list.

"We want to reduce the ancillary purchase costs, because these have to be paid entirely from equity," emphasizes Daniel Föst, the spokesman for building and housing policy for the FDP parliamentary group.

For the Liberals, however, a clear priority is the introduction of a flexible tax allowance for real estate transfer tax.

Only then, according to Föst, “do we have to take care of the additional ancillary purchase costs”.

Digitization could play a decisive role in this.

"In the long term, the land registry could be replaced by blockchain technology," says Föst.

“We will still need the notary in the future, but his working methods and tasks will look completely different due to digitization.” Buyers would benefit from this through lower costs.

In fact, blockchain technology could become much more dangerous to notaries than any political advances.

Because the blockchain, which is best known for crypto currencies such as Bitcoin and Ethereum, stores transaction data in a tamper-proof manner and thus has the potential to fundamentally change the land registry and thus the role of the notary.

There are already first approaches to this.

For example, Sweden has carried out a pilot test for a blockchain-based land registry office in cooperation with the start-up Chromaway.

"At some point the blockchain could replace the land register and the notary," says Michael Voigtländer from IW Cologne, not without adding: "It is a question of political will whether you want to use this technology."

"There are good reasons for the market economy"

Whoever orders the broker also pays him: What already applies to rentals, according to the new plans, should also be the case for purchases in the future.

Real estate editor Michael Fabricius sees several advantages in this.

Source: WELT / Dietmar Deffner

This article was first published in October 2019.