Outlook: OFT struggles to find fault with estate agents

"Sexing up" rates; Energy investing; Keeping abreast
Click to follow
The Independent Online

Nobody much likes estate agents, but try as it has, the Office of Fair Trading has failed to land a significant punch on this largely unregulated profession.

Nobody much likes estate agents, but try as it has, the Office of Fair Trading has failed to land a significant punch on this largely unregulated profession. After more than a year of investigating the industry, the OFT has been unable to recommend anything more significant than a few minor amendments to the Estate Agents Act and that the industry establish codes of practice that would include mechanisms for compensation in cases of customer abuse.

Even the National Association of Estate Agents doesn't think the OFT has gone far enough. There's to be no requirement for a professional qualification, or even for a national register of approved estate agents. A statutory mechanism for redress will only be implemented if voluntary codes of practice fail to bring about the required improvement.

For this surprisingly restrained response from the OFT, much thanks. There's nothing much wrong with the market for estate agents as it stands. Many of the abuses complained of are already illegal, and it's hard to see how greater regulation would improve the position. Much more likely it would only discourage what at the moment is a relatively healthy level of competition.

None the less, most people continue to regard estate agents as poor value for money. Commissions haven't generally fallen to compensate for the rapid rise in house prices. Meanwhile, the internet has substantially reduced marketing costs, making some estate agents an incredibly lucrative form of business.

However, this is much more a function of the raging bull market in house prices than lack of price competition. If house prices were to stabilise or fall, vendors would be more discerning about what they pay. When prices are rising by 20 per cent a year, it hardly seems to matter whether the estate agent charges a flat fee or a percentage commission, so long as he secures an outrageous asking price. If you don't like the commission, you can always advertise in the local newspaper. People don't because it generally doesn't produce such a good result.

A perhaps greater concern is the extent to which estate agents have helped stoke the bubble in house prices, with ever higher valuations, but the report doesn't touch on this.

"Sexing up" rates

In a speech yesterday, Sir Andrew Large, deputy governor of the Bank of England, talked of high levels of domestic debt being a "credible threat" to the UK economy, rather in the same way as Tony Blair used to cite the imaginary threat of Iraq's weapons of mass destruction as justification for a pre-emptive war. But rather than claim the threat was "real" as well as credible, Sir Andrew went on to insist that a calamitous ending was not at all likely. He was only saying that potential economic vulnerabilities from increased borrowing were rising.

I fear that Sir Andrew needs to "sex up" his language, or no one will take him seriously when he argues the case for a pre-emptive rise in interest rates. More seriously, interest rates should be set to control inflation, not to pre-empt other suspected economic risks. The pre-emptive use of interest rates is not so dissimilar to the concept of pre-emptive war. It requires enormous arrogance to think you know better than anyone else how events will turn out.

Energy investing

Climate change is a real and imminent threat (these blasted threats seem to be everywhere), the Energy minister Stephen Timms told us yesterday. Faced with this danger, he is doing what politicians usually do in such circumstances: holding a summit. This one will take place in the City and its theme will be how we can build more environmentally friendly power stations and so reduce emissions of greenhouse gases.

The investment community would prefer less hot air and more action ­ specifically, a clear-cut undertaking from government that if the City does put its money into wind, wave and biomass, then the ground will not be cut from under it when the fight against global warming switches to another front.

What is beyond doubt is that humanity is heading for an energy crunch, if not a crisis. The world's supply of oil will last perhaps another 40 or 50 years before serious shortages emerge, and while motor cars may one day run on fuel cells which produce nothing more harmful than water droplets, no one has yet worked out how to produce the necessary hydrogen in sufficient quantities without generating more noxious emissions in the process. To some, nuclear energy is the solution, not only to security of supply but also to carbon dioxide emissions. Yet according to Mr Timms, nobody is knocking on his door asking how they can invest in new nuclear capacity. Perhaps this is because the Government is not sending out the right signals.

The Government has committed to green energy through something called the "renewables obligation", but this guarantees a market for green energy only up to 2015. Even with the obligation, the Government will struggle to achieve its target of 15 per cent of electricity from renewables by that date. Energy, as previous administrations have discovered, is a long-term game. The dash for gas in the 1990s followed by the gas moratorium and then the sharp rise in wholesale prices has left us with a pile of planning consents for gas stations a mile high but nobody willing to build them.

If the Government truly believes that renewables are the answer to the death of coal and over-priced nuclear, then at some stage it will have to put its money where its mouth is. Our children should meanwhile already be planning for the day when the oil runs dry.

Keeping abreast

Oh for the days when business was about companies in relatively easy to understand industries operating within nationally patrolled boundaries. The industrial revolution brought about by the internet has put paid to that, making business infinitely more fast moving and international in nature, which in turn has made understanding it and keeping abreast of developments a lot more difficult.

Following my comment on Microsoft yesterday, pointing out that the biggest threat to the Bill Gates software monopoly comes not from anti-trust regulators, but from new competition and innovation, I've been e-mailed by a number of readers to say that the most potent of these threats is from "application service providers". The effect of this new trend in information technology is to encourage users to move away from software that lives on individual desktop computers and towards software that belongs to servers and is accessed through browsers.

Microsoft has been making headway in this territory, but its position in servers is smaller and less secure than in desktop computing, where the company has more than 90 per cent of the operating system market. All this rather confirms my point, I thought on reading my lesson in state of the art computing. If computer users start on mass to access their applications from centralised servers, rather than having them on their desktops, then the Microsoft monopoly is broken. While Bill Gates and Mario Monti argue the toss in the European courts, the world will move on and the European Union's anti-trust case against Microsoft will become largely an irrelevance.

However, that's not the whole story. Bill Gates didn't get where he is today by being asleep at the wheel. He's already on the case. Realising the threat, he's moved swiftly to "embrace and extend". Microsoft's dotNet framework is designed precisely for the purpose of ASP work, where it's very competitive with Unix and other alternatives. The operating system monopoly on which Microsoft's success has been built is for the time being still with us, but within 10 years it will be gone. Microsoft, on the other hand, will still be very much in evidence, a less powerful, hegemenous company than it is now, but if the transition is managed correctly, still a rich and influential one.