CBRE’s website promoting a central London development has been found “misleading” by the Advertising Standards Agency (ASA), in a decision that serves a warning to the industry when it comes to the use of estimated yields to entice investors.
After finding CBRE had breached advertising rules in two respects, the ASA told it to ensure that similar marketing in the future does not quote estimated rental values and average gross yields from letting properties, unless they hold “adequate evidence to substantiate the claims”.
It also told CBRE to ensure the basis used to calculate the estimated rental values and average gross yields are made clear in its ads, which the company had argued was not standard industry practice. As a result, rival firms would be advised to amend their advertisements accordingly.
Emma Yates, senior associate in the IP team at Irwin Mitchell, said that the ASA decision was a warning to property companies to pay attention to how they advertise.
She said: “The decision is yet another example of how careful companies have to be when it comes to the content of their advertisements. Not only do issues such as this cause reputational issues for companies that are on the wrong end of an ASA decision, but competitors can also use issues with an advertising campaign to gain a tactical advantage in their chosen marketplace.”
In October 2017, the CBRE website promoting One Crown Place, EC2, featured the brochure document One Crown Place, EC2 Rental Investment Factsheet, which included a section headed “Key facts and services” that featured a table with four columns: the type of property categorised by the number of bedrooms; “Estimated rental value £ per week”; “Estimated rental value £ per annum”; and “Estimated average gross yields”.
The table showed the following estimated average gross yields: for one bedroom, 3.9%-4.9%; for two bedrooms, 4.5%-4.6%; for three bedrooms, 2.9%-3.8%; and for a three-bedroom duplex, 3.1%-3.5%.
A complaint was made to the ASA by a complainant who did not believe the estimated average gross yields quoted in the ad were representative of the market within the local postcode area.
CBRE maintained it was confident the rental values quoted in the ad, and the corresponding gross yields, were representative of the market. It said it took care when setting the estimated rental values (ERVs) and researched the local rental market thoroughly, but did not include workings on how the quoted rental yields were calculated in the ad, because it believed the likely target audience of the ad – experienced rental investors – would be familiar with rental yields and how they are calculated. It argued that it was not common practice in the industry to show the calculation of yields in its ads.
However, the ASA found the body of evidence submitted by CBRE “did not adequately demonstrate that the quoted ERVs and therefore average gross yield figures were representative of the rental prices and gross yields of comparable properties within the local postcode area”.
As a result, it concluded that “the ad was likely to mislead”, contrary to rules of the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code).
It added: “We noted that the ad did not contain any information about the basis of how the ERVs and the estimated average gross yield, which we considered to be projections, were calculated. Because of that, we concluded that the ad breached the code.”
“The ad must not appear in its current form again. 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 it 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.”
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