The residential property market has experienced a significant surge in sales for property developers between 2010 and 2020, with revenues increasing by a factor of 2.7.

Over the same period, their gross operating surplus has skyrocketed almost eightfold, despite no rise in the number of homes built or companies operating in the sector.

These findings were revealed in a sector inquiry conducted by the Competition Authority and published on Wednesday.

The Competition Authority's assessment of the property sector, which was not limited to property developers, but also looked into land acquisition, construction, real estate agencies, banks, and insurance companies, highlighted several areas of concern and called for necessary actions.

Are employers deliberately keeping wages low?

Some of the allegations brought forth by the Competition Authority are rather serious.

For one, the Authority states it "cannot rule out" the possibility that the labour shortage in the construction sector may be due to employers in the industry agreeing to keep wages low.

This, in turn, can hamper construction progress and lead to higher property prices. That being said, speculation in the sector was also identified as a factor contributing to the price surge.

The Authority also called on developers to adhere to competition rules, especially in the context of inviting tenders and cooperation or information exchange between businesses, as these practices can negatively impact prices.

'Bid rigging' and 'bidding wars'

The investigation also pointed out competitive concerns within the estate agent profession, noting instances of excessive "bidding wars" among agencies.

The Competition Authority recommends that regulations be put in place to govern and elevate the standards of estate agents. The Authority also found that estate agencies generally charge a 3% commission. To promote pricing freedom, it proposes abolishing the 1972 regulation that enforces a maximum 3% commission rate.

Regarding the monopoly of banks in providing "completion guarantees," the Competition Authority argued that it violates the Constitution and hinders the activities of insurance companies. The Authority therefore recommends abolishing this banking monopoly.