LEGAL AND INSTITUTIONAL WEAKNESSES IN THE REAL ESTATE SECTOR [PART-4]: HOW UNREGULATED AGENCY COMMISSION PRACTICES IS COMPOUNDING THE RISK OF PROPERTY PRICE INFLATION IN GHANA - AFRICAN CONTINENTAL ENGINEERING & CONSTRUCTION NETWORK

LEGAL AND INSTITUTIONAL WEAKNESSES IN THE REAL ESTATE SECTOR [PART-4]: HOW UNREGULATED AGENCY COMMISSION PRACTICES IS COMPOUNDING THE RISK OF PROPERTY PRICE INFLATION IN GHANA

 

The passage of the Real Estate Agency Act, 2020 (Act 1047) was widely celebrated as a major milestone in professionalizing Ghana’s real agency estate sector. The Act outlawed net listing pursuant to Section 48(1)(h) and sought to bring order to a market long characterized by informality and opacity. Yet, six years after its enactment, a fundamental structural weakness remains unresolved. Commission practices are discretionary and uncapped whilst dual commission charging is legally permissible if disclosed.

 

This regulatory gap is not merely a technical oversight. It is a market distortion mechanism. When commission structures are left unregulated in an environment like ours where there is limited enforcement capacity, they do not simply reward performance; they reshape pricing behavior across the entire property market, including the rental segment.

What we are witnessing today is a quiet but systematic embedding of commission costs into property prices and rental values, thereby contributing to artificial price inflation across both ownership and tenancy markets. In a country already battling a housing deficit exceeding 1.8 million units (Ministry of Works and Housing, 2023), such distortions deepen affordability challenges and weaken consumer protection.

But before we address the substantive issues of today’s discussion, let me remind you that, the Africa Continental Engineering & Construction Network Ltd stands out as one of Ghana’s leading authorities in real estate solutions. From land acquisition, title registration, architectural design, general construction, property development, real estate investment advisory services et cetera, we provide a 360ºC service experience.

Ready to move from interest to investment, simply search “Africa Continental Engineering & Construction Network Ltd” on Google. Visit our website, explore available properties and reach out to our team for a swift professional service delivery.

With thousands of serviced litigation-free parcels of land across Accra and key growth corridors, we are uniquely positioned to help you unlock value in residential, commercial and industrial real estate. Now, let us go into the nitty-gritty of the discussion starting with how discretionary and uncapped commission regime inflates property prices and rental values.

How Discretionary and Uncapped Commissions Inflate Property Prices and Rental Values

 

In Ghana’s evolving property market, particularly under the framework of the Real Estate Agency Act, 2020 (Act 1047), the absence of a clearly defined and capped commission structures has created room for discretionary pricing practices that subtly but significantly inflate property sale prices and rental values. 

When agency fees are left open to negotiation without regulatory ceilings, they are often embedded into listing prices or passed on to tenants and buyers, compounding transaction costs and distorting true market value. This becomes even more problematic in cases of double commission charging and opaque net listings, where multiple layers of fees are built into a single transaction. Over time, these practices contribute to artificial price escalation, reduced affordability and weakened trust within the real estate ecosystem and this is a perfect description of where we are now as a country.

 

Discretionary Commission Rates and Price Padding

 

Under Act 2020 (Act 1047), commission rates are not capped. In practice, agents charge anywhere between 5% and 10% and in some cases even higher. In property sales, sellers adjust listing prices upward to preserve their margins and by implication, agency commission becomes embedded in the asking price.

In the rental market, the same pattern occurs. Landlords factor agency commissions into annual rent calculations, particularly in high-demand urban areas such as Accra and Kumasi. The result is rent escalation that is not driven purely by market fundamentals but by intermediary cost layering. This creates what economists describe as “price padding” where transaction costs are capitalized into asset prices and rental values.

The World Bank (2020) has consistently warned that high transaction costs in property markets reduces affordability and suppresses market efficiency. When intermediary fees are not transparent or transparent but not properly regulated, they distort price signals and impair allocative efficiency.

In Ghana’s case, discretionary commissions have become a silent contributor to inflation in both property prices and rental charges, hence the urgent need for a review of Act 2020 (Act 1047) to safeguard consumer protection and restore market efficiency.

Incentive Escalation and Commission Bidding Wars

 

The absence of a statutory cap creates another distortion, sellers and landlords competing to offer higher commissions to incentivize agents for faster transactions. When a property owner offers 8–12% commission to attract agent attention, that incentive is factored into the listing price. Similarly, landlords may agree to higher agency fees to secure quick tenancy placement, particularly in competitive rental sub-markets. These elevated commissions are subsequently recovered through increased sale prices or higher annual rent demands.

This phenomenon resembles what the OECD (2019) described as “intermediary-driven price amplification,” where fee competition among service providers is transferred to consumers rather than absorbed within professional margins. Instead of commissions being a cost of doing business, they become a cost of acquisition borne entirely by buyers and tenants in most cases.

Over time, such practices contribute to systemic overpricing across comparable properties and rental units, thereby shifting market benchmarks upward just as we see in the Ghanaian real estate market today.

Dual Commission: Disclosure without Protection

 

The Real Estate Agency Act 2020 (Act 1047) allows dual commission (charging both seller and buyer), provided it is disclosed as set out in Section 48(1) (e) of Act 2020 (Act 1047). However, disclosure does not eliminate economic burden. In property sales, the seller factors the seller-side commission into the property price, the buyer purchases at the inflated price and then pays an additional commission directly to the agent afterwards.

Similarly in rental transactions, the landlord may adjust rent upward to account for commission paid to the agent, the tenant then separately pays agency fees to the agent afterwards. To demonstrate this practically, let’s assume the agency fee is 10%, one can do the arithmetic and see by what percentage or absolute amount the consumer is being shortchanged. 

This results in effective double extraction from the buyer or tenant. This is unfair and it puts almost every buyer or tenant under pressure particularly, persons living in major cities such as Accra, Kumasi and Takoradi. Citing best practices globally, dual agency or commission systems have been heavily scrutinized because of inherent conflicts of interest and pricing distortions. 

 

In the United Kingdom, the Competition and Markets Authority (2020) emphasized transparency and consumer protection measures in property brokerage markets to prevent hidden cost burdens. In the United States, commission practices are increasingly under regulatory and antitrust review, with reforms aimed at enhancing transparency and reducing buyer-borne distortions (U.S. Department of Justice, 2023; National Association of Realtors settlement framework, 2024).

 

Similarly, in Australia, the Australian Competition and Consumer Commission enforce strict consumer protection rules in real estate transactions to ensure commission structures do not mislead or unfairly burden consumers (ACCC, 2022). The global pattern is clear; disclosure alone is insufficient. Structural safeguards are necessary to keep the market efficient.

Impact on Housing Affordability and Market Confidence

 

The consequences of these commission distortions in Ghana are profound and span both ownership and rental markets, impacting affordability and erosion of market trust.

Reduced Housing and Rental Affordability: When intermediary costs are capitalized into prices and rents, entry barriers are being raised automatically. For middle and lower-income households, homeownership becomes unattainable, while rental accommodation becomes increasingly burdensome.

The World Bank (2019) notes that high transaction costs disproportionately affect first-time buyers and lower-income households, deepening inequality in property access. In Ghana’s urban centers, this translates into prolonged rent advances, informal tenancy arrangements and increased vulnerability for tenants.

Artificial Price and Rent Inflation: Prices and rents rise beyond fundamental value drivers such as land cost, building materials, financing costs and infrastructure.

Erosion of Market Trust: When buyers and tenants perceive pricing as opaque or inflated, confidence declines. Informal transactions increase. Litigation risks grow and professional credibility suffers. A regulated market should inspire confidence but not allow distortionary mechanisms to perpetuate just as we have in our current Real Estate Agency law and market.

Recommended Amendments to Act 1047

 

If Ghana is serious about restoring pricing integrity and consumer protection, Act 1047 must be strengthened in four key areas:

Introduce a Statutory Commission Cap: A capped commission range (e.g., 3–5%). This will reduce price and rent padding, align commissions with international norms and stabilize transaction costs.

Prohibit or Strictly Limit Dual Commission: Dual commission should either be prohibited outright or be permitted only under tightly controlled circumstances with independent buyer or tenant representation.

Conclusion

The motive behind this proposal is not to target and restrict real estate agency business; it is a structure to protect market integrity. Act 1047 was a necessary step, but leaving commissions uncapped and permitting dual commission charging without structural safeguards has unintentionally created pricing distortions that compound Ghana’s housing crisis across both property sales and rental markets.

If unchecked, these practices will continue to inflate property prices and rental values artificially, undermine affordability and erode trust in the sector. The time has come to refine the law and make it economically intelligent. A well-regulated commission framework will not collapse the market. It will strengthen it and ultimately bring Ghana closer to a real estate ecosystem that serves its citizens right.

References

 

• • Republic of Ghana. (2020). Real Estate Agency Act, 2020 (Act 1047). Accra: Government of Ghana. Available at: https://www.parliament.gh

• • Australian Competition and Consumer Commission (ACCC). (2022). Real estate and property services guidance. Available at: https://www.accc.gov.au

• • Competition and Markets Authority (CMA). (2020). Guidance on estate agency work and consumer protection. Available at: https://www.gov.uk/cma

• • Ministry of Works and Housing, Ghana. (2023). National Housing Policy Review Report. Available at: https://www.mwh.gov.gh

• • National Association of Realtors (2024). Settlement overview and commission transparency reforms. Available at: https://www.nar.realtor

• • OECD. (2019). Competition and regulation in real estate brokerage services. Available at: https://www.oecd.org

• • U.S. Department of Justice. (2023). Antitrust scrutiny in residential real estate brokerage. Available at: https://www.justice.gov

• • World Bank. (2019). Housing Market Dynamics and Affordability. Available at: https://www.worldbank.org

• • World Bank. (2020). Property Market Regulation and Transaction Costs. Available at: https://www.worldbank.org
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About Author

 

Daniel Kontie is a young enthusiastic Ghanaian Entrepreneur, the Executive Chairman of the Africa Infrastructure Group; comprising the Africa Continental Engineering & Construction Network Ltd (ACECN), Falcon 48 Developers; Africa Infrastructure Energy and Africa Land Banking Investment Ltd. All these are infant establishments, disrupting the conventional way of brand building across the African Continent. Daniel is a columnist, a writer and a member of the Ghana Built Environment Writers Association. He can be contacted via tel: +233209032280; Email: d.kontie@acecnltd.com; Website: https://acecnltd.com/.