Property advice regulation and legislation is not enough to protect consumers

Posted on October 24, 2013 by | 1 Comment

If the past 10-15 years in real estate has taught us anything, it’s that no amount of regulation and legislation can protect consumers from bad advice or crooks hell-bent on ripping them off.

The 1990s was the era of the get-rich-quick seminar, when tens of thousands of Australians were duped by two-tier marketeers, seminar gurus and others into paying inflated prices for badly-located real estate or grossly over-priced “mentoring” services.

Eventually, the level of consumer outcry reached levels where politicians had to act. Queensland enacted the PAMDA laws in 2001 and in the following years most of the other states revised their real estate legislation, supposedly to stamp out the worst excesses of the residential property industry.

But in most cases the politicians sought advice on what should be done to protect consumers from the real estate industry. It was tantamount to asking the mafia for advice on how to stamp out the drug trade.

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  • Andrew Hayes says:

    Peter, I agree with you. Very low interest rates and massiveax breaks tend to reduce one’s critical faculties. We wonder if this could be different if all tax perks are abolished. We saw that with agricultural investment schemes, which paid commissions of 10 per cent to financial planners and mostly collapsed, and now property developers are paying similar commissions to get SMSF cash. The super funds have over $1.6 Trillion in cash and SMSFs have 31.5% of that pile. The Reserve Bank revealed last week that about $18 billion of the $500bn in SMSFs — or about 3.6 per cent — is invested in residential property.

    Some surveys suggest the allocation to residential property could increase to 30 per cent, but this seems far-fetched.

    However, even if it increases to 10 per cent, that’s another $32bn to be used as deposits for buying properties. Gearing can be 70:30, so a 10 per cent average asset allocation would release $90bn.

    That is a juicy meal for the sharks who get big sales commissions from developers.

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