The Office of Fair Trading (OFT) is to investigate the market for buying and selling homes. It will consider not only the role of traditional estate agencies, but also alternative ways of buying and selling homes, such as internet-based property retailers.
Fair competition
The main focus of the 'market study' will be whether consumers are treated fairly, asking if there is fair competition in the market. It will examine whether there is effective competition between estate agents on price and quality and, if not, what might be done to improve this. The role of regulation will be evaluated, to consider whether regulation is effective and serves consumers' interests. A separate strand of the investigation will examine the ability of internet-based agencies to enter the market.
A potentially important aspect of the review will look at the relationship between estate agents and mortgage brokers, surveyors, solicitors and financial advisors. The Financial Services Authority has in recent months banned several mortgage brokers for inadequate controls, poor quality advice and even for dishonesty and involvement in fraud. Some of these mortgage brokers carried out a range of other related activities, such as accountancy and financial advice, but without necessarily having any professional qualifications.
Promoting innovation
The OFT also wants to promote greater innovation in the property-selling market. Its chief executive John Fingleton says: "Buying or selling a home is something most people do only a few times in their life, but it is usually the biggest transaction they will make. We want to ensure that consumers are served well when buying or selling a home and are supported by an effective, competitive and innovative market. Before embarking on such an important piece of work, we want to engage with the industry and consumer groups to get a clear idea of the most salient issues we should focus on."
Prior to beginning work on the investigation early next year, the OFT will consult with the UK and devolved governments, consumer groups and sector representatives. The OFT could propose as a result of the study changes to the law and regulations and to the rules of representative bodies. It can also initiate enforcement action if it finds that market participants are breaching their existing legal duties.
Support
There is widespread support for the OFT's market study. Peter Bolton King, chief executive of the National Association of Estate Agents, says: "We welcome the news that the Office of Fair Trading is to launch a market study into the housing market. We will of course work as closely as possible with any study of the market - and we are hopeful that any such study will raise consumer awareness about the reality of the market.
"There is nothing to stop anybody from becoming an estate agent and there is a real need for consumers to be aware of this. Buying a house is probably the largest investment that a person will make, so they should make sure that they use property professionals and that is why we ensure all NAEA members follow our rules of conduct. The NAEA has long called for appropriate regulation of the market and I hope that the OFT will recommend the same when it concludes its study.
"There is clearly a lot of competition between internet retailers, and many people will certainly initially begin their search for a property online. Again, the same principle applies. To be safe, consumers should use the professional agents."
Consumer endorsement
Which? - previously called the Consumers Association - also endorses the OFT's actions. Which? head of campaigns, Louise Hanson, says: "This could be great news for consumers and an important step towards reforming a market that we've had serious concerns about for years. The OFT market study should identify ways of making the process of buying and selling a home cheaper, quicker or easier."