Leading property consultancy CBRE has been told not to advertise off-plan investment properties using estimated rental values and gross returns unless they can substantiate their claims, and that the figures used to do so must be clear in the ads.
This judgement throws a considerable spanner into the property investment sector which until now has been able to make largely unsubstantiated claims about return on investment.
The Advertising Standards Authority (ASA) received a complaint about an advert CBRE had published online for a newbuild tower it was marketing in The City called One Crown Place, EC2., which is being built by Malaysian firm AlloyMtd.
In a section marked ‘key facts and services’ a link loaded an online brochure that made claims for estimated gross yields at the development of up to 4.9% depending on the property size.
The complainant said they did not believe these yield figures were representative of the market in the area, and said the way they had been calculated had not been made clear.
CBRE then made detailed representations to the ASA saying it was confident of the figures and that they had been based on 11 recent tenancies at a nearby and comparable development called The Heron using data from Lonres and Rightmove.
“The CAP Code requires that the basis used to calculate any rate of interest, forecast or projection must be apparent immediately,” the ASA says.
But the ASA has upheld the complaint, saying CBRE had not explore the criteria on which it had picked properties in The Heron to compare its developments with, that the prices within the Rightmove data were asking not sale prices. It also said the CBRE had not provided evidence of how it calculated the estimated rental value or gross returns.
“We told CBRE to ensure that similar ads in the future did not quote estimated rental values and average gross yields from letting properties, unless they held adequate evidence to substantiate the claims.
“We also told CBRE to ensure that the basis used to calculate the estimated rental values and average gross yields were made clear in the ads.”
Read more about recent ASA judgements.