Welcome to our three-part interview series with Daniel Malek, CEO of D-A-CH at KENSINGTON Finest Properties! In this series, we talk to Malek about valuable tips for property buyers, investors and sellers, his views on the property market in the D-A-CH region, the digitalization of the industry and his personal vision for the KENSINGTON brand.
In the first interview, you will gain insights and practical tips on how to successfully buy, sell or use real estate as a capital investment. Malek shares his knowledge of financing, long-term returns and how to avoid common mistakes made by many buyers and sellers.
In the upcoming interviews, you will learn more about current developments and opportunities in the property market and gain a personal insight into Malek's goals and future plans for KENSINGTON. Look forward to the next two parts, which will follow shortly!
For many people, buying a property is one of the most important decisions in their lives. In your opinion, what should buyers definitely consider before buying a property? What should they prepare for? What makes a buyer ready?
Well, a buyer should definitely think about his financial situation beforehand. This is a very, very important aspect, because it is often the case – or sometimes at least the case – that you want something badly, and then you no longer think quite rationally about whether it really makes sense or whether it fits or not. You may also know this from yourself. That's why it's very important to keep an eye on the financial situation, especially in the long term. We have learnt this from the past.
If you look at the market and the interest rate fixation, you can see that people who took out a ten-year fixed-rate mortgage ten years ago were at 1.x percent back then and are at 3.x percent today. Depending on the repayment rate, this can be quite a challenge, to put it mildly. That's why I think it's extremely important to have good and sensible financial advice. We are happy to provide this service through KENSINGTON Financial Services, where we go through these topics with the customer: Can I afford this property? How long can I afford it? How can I optimize this, taking into account subsidies and so on?
What else should buyers look out for?
I think it is just as important to find out about the property itself, whether through an estate agent or other sources. Around 70 percent of properties on the market are usually offered through an agent, which has the advantage that the procurement of the documents, the selection of the property and the information about the property can and should be presented transparently. There is the saying ‘you don't buy a pig in a poke’. Of course, this can lead to problems if, for example, you don't know that the groundwater can break through during heavy rainfall. That's why it always makes sense to be well-informed about the structural aspects of a property.
Financial mistakes can hurt just as much as damage to the house later on. And as banal as it sounds, I would also find out about the neighbors. After all, you will be living there for a long time and want to know who you are sharing your life with. This may be just a small fact, but it is still important.
So there are really many aspects that a buyer has to consider, especially in today's world, where life is so fast-paced and many things are constantly changing. If I had to summarize it in one sentence, I would say: I would always get a professional to help me in all areas related to buying a property – be it financing, expert opinions, estate agents or whatever – to be on the safe side with this major investment.
There are also a great many people who invest in property, not for their own use, but as a capital investment or for their retirement. In recent years, the markets have been very volatile at times, and now interest rates are likely to fall again. What would you advise investors who want to use property as an investment?
Well, what would I advise investors? In my opinion, real estate is always a sensible investment, regardless of when – whether in high-yield phases, in low-yield phases, during the coronavirus crisis or whatever. Why? There is the term ‘concrete gold’, and if you look at the last 100 years, real estate has always won in the long term, regardless of whether there were highs or lows.
Even in the last ten years, despite the fluctuations in the last four or five years, property has achieved an average annual increase in value of 5.5 percent. So it is definitely not a bad investment. In addition, investors benefit from many other factors such as depreciation, rent increases, index-linked rents, graduated rents, the performance of the property and the appreciation of regions.
I firmly believe that real estate should be in every classic investor's portfolio – if only for reasons of risk diversification. Of course, you have to be able to afford it, but I believe that a real investor cannot get around real estate.
Even in the last three or four years, when real estate prices have not exploded, there was always someone who wanted to sell and someone who wanted to buy. At the end of the day, supply and demand balance each other out, and that always makes a property investment attractive.
For many property sellers, for example those who have inherited a house from their parents, selling is a big challenge. How can sellers best prepare for it? And what are some of the common mistakes to avoid?
The situation is a little different for the seller. As a rule, they are not in the area of financing, which often plays a major role for the buyer. But here, too, it depends very much on the individual case and on what type of property it is and which experts are consulted. When selling a property, and I'm not just saying this because I'm a real estate agent myself, I would always recommend consulting an agent. Why? Because it minimizes the risk of making mistakes in marketing the property.
Often, when people inherit a property, they have no idea what it is worth, how to value it correctly or when and how to market it. There are many aspects to consider: How do I market a property, what are the risks, how can I ‘spoil’ the sale price or the property itself by using the wrong strategy? Another important point is the risk of liability. People often think that they are simply selling a property and that all damages are excluded in the sales contract. Yes, that is true, but there are always liability traps.
Could you give us an example?
A classic example that I have often encountered: Imagine you want to buy a property from a private seller and, for example, the attic is listed as living space. The attic may be two meters high, and you may be able to stand up there, but if it is not designated as living space in the building documents, then it is not. If the seller says that there are 30 square meters of living space and that is not true, it can lead to significant problems later on. It is details like this that make an estate agent worth every penny, if only to minimize liability risks and obtain the necessary documents. Anyone who has ever been to the building authority knows that you need strong nerves for that. And that's not all – countless documents have to be obtained, and not only from the building authority.
The preparation of the property begins with the photos and ends with the correct valuation of the property. I would even go so far as to say that in 99 percent of cases, an estate agent achieves a higher selling price than a private seller. This is due to many different factors, and I am not saying that private sellers are ‘too stupid’ - not at all. But an estate agent has the advantage of being able to get a comprehensive picture of the property and assess the market correctly. He can assess risks, but also advantages, better.
A specific example: a friend of mine wanted to sell her house at a relatively good price. When I looked at it, it turned out that she could build on her property because of its size. She didn't know that, and so she was able to get a much higher price in the end. Such details can significantly influence the success of the sale.
What's more, these days people expect everything to happen quickly and smoothly. If I can't reach someone by phone or only get their voicemail, that's often a problem. All of these things can negatively impact the sales process. That's why I'm making a clear statement: always hire a professional!
