Cabinet has endorsed amendments to the Real Estate Agents (Fees, Forms and Appeals) Regulations.
In Tuesday’s meeting, Cabinet has also endorsed the establishment of a working group to monitor the effectiveness of the regulations to ensure its alignment with market dynamics and stakeholder needs.
The principal regulations were gazetted on 26 May 2022 as Legal Notice No. 76 of 2022.
It regulated the commission rates charged by real estate agents for residential properties in Fiji and aimed to ensure fairness and transparency in the market while protecting the interests of property owners and potential buyers.
The regulations stipulated a cap of two per cent for commission rates on residential properties valued at $500,000 or less.
The cap was based on multiple factors including prevailing commission rates charged in the market, associated costs of property transactions and Government’s objective to foster a more transparent and equitable framework for consumers.
However, various limitations have been identified since the two per cent cap was gazetted in 2022.
These include the negative impact on business operations of real estate agents, its hindrance on market dynamics and reduced competitiveness in the sector.
It also appears that some agents have manipulated the two per cent commission rate, especially with the introduction of the disbursement policy.
The following concerns have been raised in consultations conducted by the Real Estate Agents Licensing Board (REALB):
(i) The regulations have restricted competition within the real estate industry as the fixed rate have limited agent’s ability to differentiate themselves based on services offered;
(ii) Some stakeholders argued that the regulations did not consider consumers diverse needs and preferences, limiting their options and potentially increasing the cost of engaging real estate agents;
(iii) Stakeholders highlighted the administrative burden of monitoring and enforcing the regulation, consuming time and resources that could be better spent on delivering quality client services;
(iv)The lack of flexibility in having a fixed commission rate hinders the efficiency and fairness of the real estate market;
(v) A one-size fits all approach may not accommodate the varying values of properties. The fixed rate may unfairly impact property owners when dealing with properties of significantly different market values.
Cabinet approved the removal of the two per cent cap on commissions for sale of residential properties below $500,000.00.
This will enable the real estate market to operate on market-driven commission rates, fostering healthy competition and facilitating growth.
Therefore, any commission to be charged by a real estate agent, officer or licensee on the sale of any residential property amounting to $500,000 or less will not be subject to any prescribed rate.
In addition, Cabinet approved the formation of a working group comprising the Ministry of Trade and stakeholders including REALB, Consumer Council of Fiji and the Fiji Competition and Consumer Commission (FCCC) to regularly monitor the regulations to ensure its alignment with market dynamics and stakeholder needs.