Innovation needed to shake up housing market

Better deals for house buyers and sellers could be secured through a shake-up of how homes are sold, including updating legislation and allowing new entrants into the market, a report by the OFT has claimed.

The study found that the housing market remains dominated by traditional estate agents with weak competition between them on price. It reveals that as property prices rise during housing booms, so too do estate agents’ fees.

Overall satisfaction with estate agents, however, was shown to have improved in recent years. Where there are problems with transactions, consumers generally do not think the estate agent was at fault.

More than a quarter of sellers (27%) who used a traditional estate agent have considered using an alternative selling method, and the OFT argues that we could learn from the US, where alternative ways of buying and selling a home have the potential to put competitive pressure on traditional methods.

However, the OFT suggests that current legislation may be hindering the development of new business models and needs reform so that new entrants, for example those that only introduce private sellers to each other, are not burdened with inappropriate regulation.

John Fingleton, OFT Chief Executive, said:

“In the present economic climate it is more important than ever that people get a good deal when buying or selling a home.”

“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. The Government can help this process by updating legislation and making sure regulation only applies where it is essential to protect consumers.”

“We also encourage home sellers to negotiate hard on commission fees and consider using alternatives to traditional estate agents.”