UK real estate industry disappointed with results of year long study into estate agents

Price competition between traditional estate agents remains weak and commission rates are ‘sticky’. This typically means an increase in agent fees during property booms, only for them to fall again when activity tails off, says the report from the Office of Fair Trading.
 
Internet portals have transformed the way people search for a home, the OFT’s year long review also says, but the portals used are still dominated by traditional estate agents. Innovation could have a ‘dramatic impact’ on the cost of buying and selling a home, in particular through online services, it continues.
 
‘Legislation should be updated to accommodate alternatives to traditional estate agency and to ensure the market is as open as possible to new entry and innovation,’ it concludes.
 
The OFT also urges policymakers and regulators to consider ways of clamping down on potential conflicts of interest within the property buying system, particularly payments for related services such as such as mortgage advice, surveys, and conveyancing.
 
So-called ‘introduction fees’ paid by estate agents to other firms for introducing business come in for particular criticism, with the suggestion that such payments might be banned. However the OFT stopped short of calling for further regulation, arguing that current legislation, dating back to 1979, is sufficient.  Also a licensing system for estate agents was also ruled out as unnecessary.
 
‘Encouraging new business models, online estate agents and private seller platforms could put useful competitive pressure on traditional models and lead to better value for buyers and sellers,’ said OFT chief executive John Fingleton.
 
‘The government can help this process by updating legislation and making sure regulation only applies where it is essential to protect consumers,’ he added.
 
While the public seem mostly content with the current situation parts of the real estate industry says the report is a missed opportunity for a major overhaul of the sector. The OFT said only 32% of those who had used a traditional estate agent said they believed that the fees they had paid to their estate agent represented slightly or very poor value for money, although 64% of sellers in England and Wales admitted that they had not negotiated a lower fee.
 
But Peter Bolton King, chief executive of the National Association of Estate Agents, said he was disappointed with the report’s conclusions. ‘We are very happy that the OFT’s study has shown the very high levels of consumer satisfaction with estate agents. However, once again the OFT has categorically failed to see that better regulation of the home buying and selling market is required. Buying a home is often the largest single transaction of a person’s life and it is disappointing that the OFT has not thought it appropriate to acknowledge that a robust and appropriate level of consumer protection is needed,’ he explained.
 
King said the NAEA would like to see a greater level of regulation to ensure that ‘professional, qualified estate agents are not confused with agents that, all too often, fail to meet the basic professional standards we would expect from our members’.
 
The Royal Institution of Chartered Surveyors also lashed out at the study saying that there is more to protecting consumers than prices. ‘The OFT needs to start talking to the government about a joined up approach for property. The housing minister has announced plans for regulating lettings while OFT is advocating a free for all in sales,’ said Steven Gould, director of RICS regulation.
 
‘The consumer has a right to expect protection in both and the adoption of decent standards by those purporting to advise the public on buying and selling property. Unlike OFT, we do not see that this precludes new business models,’ he added.