RentBackMyProperty.co.uk, the leading sell and rent back site in the UK, has released the result of its survey regarding the effect of the FSA regulation of the sale and rent back (SARB) market 3 months ago.
Online PR News – 09-October-2009 – – The SARB market has undergone an interim regulation by the UK's Financial Services Authority after a number of serious incidents revealed how vulnerable consumers can be. Interim authorisation started on 1st July 2009 and full regulation will start one year later.
Since the regulation was introduced, two major changes have taken place. The number of SARB operators approved to work in this market has dropped from well over a 1000 down to less than 50. This is because the regulatory requirements are too high for individual trader or small companies to achieve. The nature of the SARB transaction has attracted mainly the buy to let investors in the past as typically that is what was taking place i.e. a buyer willing to rent a property as an investment. However, this has now changed almost completely and it's now property investment companies that own the properties instead of individual landlords.
The second major change that has taken place since the introduction of the regulation is that consumer confidence has risen immensely. This has been the aim of the regulation and it is believed that it has worked very well. A quick survey of our customers revealed that the majority of them have their confidence restored in the SARB product now that the FSA has introduced tough enough rules to ensure fair treatment and protection of consumers. Consumers have access to a Compensation Scheme if they are disadvantaged in any way by the SARB company.
Currently, the FSA is proposing new rules (to be implemented in 2010) to provide further protection to vulnerable customers in the SARB market. This is a positive development to ensure only the most capable and committed companies can operate in this market.
Overall, there have been many benefits to the introduction of the regulation. However, the main down-side is that the limited number of buyers has pushed down the average value of purchase prices achieved. Consumers looking to sell to rent were being offered 75%+ before the 1st of July. It's believed currently that most regulated companies will not offer more than 65% of the market value for this product, with some paying as little as 50%.