Property advice is financial advice and needs to be licensed
Property investment advice should be subject to the same rules and strictures as retail financial advice, according to Australia’s major consumer organisations.
The major consumer groups, via the Consumer Policy Research Centre, have told a Senate inquiry that major gap exists in the current regulatory regime and that there are no laws preventing poor quality property investment advice.
The consumer groups want the Government to make the regulation of property investment a Commonwealth responsibility, the insertion of a definition of property advice into the Corporations Act and the ASIC Act and require anyone providing property investment advice to hold an AFSL.
In a submission to the Senate inquiry into the Financial regulatory framework and home ownership, the groups said that while Australia has, “rightly, introduced strong and clear protections to ensure that financial advisers need to provide recommendations in the best interest of their clients” the same does not apply to real estate.
“These protections do not cover situations where someone is seeking to invest in real estate – they only apply to financial products such as shares,” it said.
“This issue has been raised in multiple inquiries, including the Scrutiny of Financial Advice Inquiry conducted by the Senate Standing Committee on Economics in 2016.”
“This gap arises with the issue failing to fall neatly within the responsibility of Federal or State governments. The Federal Government is responsible for regulating financial services markets, including the advice profession. State and territory governments regulate property transactions. Advice on property transactions has not been addressed, leaving investors at the mercy of an unregulated sector that can push people into poor investments counter to their interests, including known high-risk investments like land banking.”
“It has been eight years since the Scrutiny of Financial Advice inquiry report, yet the committee’s conclusion still remains true:
‘Despite the number of reviews recommending that property investment advice be regulated, no concrete action has been taken toward the introduction of a uniform regulatory framework that would include property investment advice, which remains exempt from the Corporations Act.’
“This inquiry should consider the ongoing risks that investors and the people who live in investment properties face because of this regulatory gap,” it said.
Reliable property advice should only be sought from licenced real estate agents.
However many agents are just sales people and really do not understand the underlying market.
More regulation is just “sand in the gearbox” and typically attracts additional government levies!!
Real estate lobby way, way too strong for any Govt to get that through.
I do have some concerns regarding mortgage brokers daisy chaining highly leveraged property portfolios for clients.
At what point does adding another property to the portfolio using a ton of debt go from being facilitation only to a financial advice strategy?
I’d suggest it would be when the second investment property is added to the portfolio using equity from the first.
Lack of regulation in property over many years is one of the reasons that the market is so out of reach for the everyday person. Driven on by uneducated and unregulated brokers and agents left to run wild. You won’t get any reliable advice from a real estate agent. They are just there to sell you something, by any means. Housing’s primary focus is to provide shelter. I think that has been long forgotten except by those who are unable to have the simple right to have somewhere to live at a manageable cost, be it renting or buying.
Yeah good luck getting state based RE agents licensed like Financial Advisers. It will never happen. It should but it won’t when RE Agents are under State Govt regs.
Also, just imagine the uproar of RE’s going through all the same educational and AFCA BS Financial Advisers now experience.