Estate agents' commission

We refer to Ms Katheryne Desira's e-mail carried in Adrian Muscat Inglott's Consumer Affairs column (May 25).

First of all, we would query the statement that the housing market in Malta has reached saturation point. In a saturated market, supply outstrips demand, resulting in a glut of properties for sale, a stagnant market and low turnover.

This is certainly not the case at present, as can be seen from the steady growth in the industry. New developments, when properly presented and priced, are selling well; this is also the case with resale property placed on the market by the current owners.

Ms Desira also remarks: "It is much cheaper to buy a ranch in America than a flat in Malta". She is correct - and given the fact that the United States is a vast country with huge land resources, this is not at all surprising. Malta is a speck of land measuring 17 miles by nine, with minimal land resources. When one also considers land outside development zones, unpopular areas, agricultural land and industrial zones, one is left with very little in the way of available properties in desirable residential areas. The basic laws of supply and demand dictate availability and price, and property prices in Malta have thus been on the rise for many years.

It is pertinent to point out that, to date, a full reform of the rental market and the issue of temporary ground-rents has not yet been implemented, and that no incentives (or disincentives) exist to discourage land hoarding and the issue of derelict/vacant property. Tackling these issues is expected to increase availability and thus result in lower prices.

Ms Desira also opines that the 5% fees charged by estate agents contribute to the "already much inflated prices of property in Malta", and further states that "only a few (countries) charge in that region".

May we point out that local estate agents often operate under an exclusive or sole agency basis at a rate of 3.5%, and that lower fees are often accepted to facilitate negotiations, particularly in the higher price brackets. This compares favourably with South Africa (5-7%), Spain (5-10%) Italy (3-5%) and Portugal (4-5%).

It is true that many UK agencies' charges range from 2% to 3.5%, yet they market in rather a different way. Little pre-qualifying of buyers is done, and their set-up permits the agent to send over details for the buyer to view property himself. Furthermore, extra charges for marketing and advertising are agreed between the agent and the owner or developer.

Locally, estate agents are involved in on-site inspections, facilitating bank finance, guiding both buyers and sellers as to their expenses, and in accompanying buyers to as many properties as necessary until the suitable one is identified. Exposure of the property is carried out through boards, Websites, local media, overseas media, exhibitions, fairs and in many other ways - at no extra charge to the owner, but at considerable expense to the estate agent.

We were extremely surprised to read that Ms Desira feels that "certain estate agents" overvalue property. We see no logical reason why any agent would deliberately work in this fashion, as having overvalued listings is certainly not conducive to making sales! Our members' valuations are based not only on the property itself, but also on the supply of and demand for similar properties in the area.

The larger agencies also have extensive records for comparative purposes, in order to assist them in arriving at realistic figures - this is where some disagreement may arise, in that architects are not estate agents, and may therefore be unaware of current trends. Should agents wish "to get rich overnight", if anything, they should undervalue property thereby increasing sales and turning over property quicker!

Regrettably, it is all too easy to set up shop as an estate agent or broker, and the lack of industry-wide standards results in clients receiving levels of service that range from the excellent to the abysmal. Further- more, existing legislation dates back to early last century, and certainly has been overtaken by events.

The Association of Estate Agents is in full agreement that standards and accreditation should be introduced to regulate all the players in the market - be it agents, brokers and sensara - and that legislation is enacted to protect both the giver and the receiver of services against unethical behaviour.

Adrian Muscat Inglott writes:

It is interesting, indeed encouraging, to note that the Association of Estate Agents (ASEA) is in full agreement that standards and accreditation should be introduced to regulate all the players in the market. I appeal to whoever is responsible to bear this in mind and I would encourage the ASEA to help us in our campaign for the regulation of estate agents.

I stress that there are estate agents in the UK who charge 1% commission and, yet again, I invite local estate agents who are prepared to do so to write to me. On my part I would be more than happy to add another list to our lists, that is, of "Estate agents who charge 1%, or perhaps 2%, commission".