French pay too much for their brokers in an opaque market

Personally, I have been calling it out for years, but now the French competition authority, also known as Autorité de la Concurrence, has also expressed concern about high and opaque commissions in the buying and selling of real estate. They call for stricter supervision of professionals in the sector.

According to the Autorité de la Concurrence, the average commissions charged in France in 2022 were as high as 5.78% of the sale price, while in the rest of the European Union the percentage was less than 4%.

In 2022, the French government asked the Autorité de la Concurrence to investigate the issue, particularly because of the changes occurring in the real estate brokerage market – the services offered by players to bring buyers and sellers together. The competition authority identified several problems, including the opacity of tariffs, unequal information between market players and the fact that they are not all assessed in the same way by the ‘Loi Hoguet’ law, which has been regulating property sales since the 1970s.

These problems have arisen particularly with the emergence of “new professions” in the real estate sector, such as online brokers and “real estate coaches”. These professions are not subject to the same legal regulations as traditional real estate agents, but they can get commissions from estate agents. Sometimes their services are charged in an opaque way as part of the commission.

According to the French competition authority, high commissions are a burden on consumers in France. They have calculated that households could save almost €3 billion a year if commissions were brought in line with the European Union average. That is why the Autorité de la Concurrence is proposing a reform that would give households more choice in deciding which tasks they want to do themselves and which they want to leave to intermediaries. They propose to draw up a detailed list of services provided by professionals and to standardise the rules for advertising, especially online. They also want to make public the real estate data that notaries already hold on sale prices and commissions.

The aim of these proposed measures is to reduce information asymmetry and make the application of the Hoguet Act clearer. The French competition authority has submitted its recommendations to the Ministry of Economy.

Whether it will help I doubt, because there are complex causes behind high prices, including people’s habit of offering their homes through multiple estate agents. If everyone wants to earn a living, people have to use fewer estate agents and so estate agents have to disappear. If this does not happen, prices will remain high.