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UK real estate sector to come under scrutiny from top consumer watchdog

It is to undertake a market study into all aspects including competition on price and quality between service providers, principally estate agents.

It will also look at the prospects for entry by new business models, including Internet-based models, whether the existing regulatory framework provides the right balance between protecting consumers who are buying or selling a home and ensuring that the market remains open to competition and innovation.

The relationships between estate agents and other service providers such as mortgage brokers, surveyors, solicitors and other professional advisors will also be covered.

The study will cover the whole of the UK, while recognizing the significant differences in how the market works in Scotland.

'With the economic downturn, we need to ensure that consumers receive a good service when buying or selling a home, from a market that is competitive, innovative and well-functioning,' said Heather Clayton, Senior Director of Infrastructure at the OFT.

'We have had constructive discussions on the scope of this study with interested parties from across central and devolved government, consumer groups and the industry. This means we are starting the study with a clear understanding of the key issues,' she added.

The news was welcomed by the Royal Institution of Chartered Surveyors but the organisation said it was disappointed that the scope had not been extended to lettings and lettings agents.

'The study represents an important step towards the government recognising that improvements are long overdue in the estate agency sector, where currently completely unregulated or qualified agents can operate with little control,' said Gillian Charlesworth, RICS director of external affairs.

'Responsible firms and professional bodies have already done a great deal of groundwork on the need for better regulation of this sector and we have already concluded that this is the only way to achieve effective protection for the home buying and selling public. We hope that the study will produce swift and clear conclusions that estate agents must be properly regulated,' she added.

But she concluded that not looking at the lettings market was a missed opportunity. 'We are disappointed that the OFT has not taken the opportunity to address the related issue of lettings and letting agents, given that many estate agents also operate as letting agents from the same premises. We believe the government has missed an opportunity to look, from the consumer's perspective, at how the market provides property services,' she said.