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Tesco and Google cleared to enter property market? - 24 February 2010

Following last year’s aborted attempt to enter the property market, supermarket giant Tesco could be set to return to UK property in the coming months if a recommendation from the Office of Fair Trading (OFT) is upheld. The OFT is calling for sweeping reforms of the way property in the UK is sold, saying that homeowners should be allowed to use websites set up by supermarkets and search engines for as basic flat fee rather than a percentage of the sale price.

If the OFT proposals are adopted, the UK property market could change completely, with Tesco and Google competing for business on a flat fee basis rather than using estate agents to sell properties. It would mean that regulations and legal requirements to verify property details are swept aside, and costs reduced to an extent to allow Tesco to muscle in on the market.

Tesco last year sold the property business it was setting up at the time to agent Spicerhaart, after a large number of agents demanded their properties be taken off the site just months after its launch. It is thought Tesco is once again working with Spicerhaart on this new venture, which could see properties advertised on Tesco’s website. In addition, Tesco’s banking service released a statement saying it hopes to offer mortgage products before the end of 2010.

The OFT is said to be keen to end what it sees as the monopoly of estate agents, which it blames for a lack of competitive prices in the housing market. However, many industry observers believe that the granting of estate agency powers will create a monopoly itself; such is the marketing and loss-leading power of the Tesco brand. In many ways, the only competition that a Tesco property website would face would be from Google should it decide to also enter the property sales arena.

The removal of the necessity for Tesco to comply with the Property Misdescriptions Act 1991 by sending a member of staff to each property to ensure information is accurate is at the heart of the OFT proposals. This would put the legal responsibility on sellers to ensure that information is accurate and not misleading. This would extend the rule of caveat emptor even further in the UK property-buying process.

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