Property advice is financial advice and needs to be licensed

Mike Taylor

Managing Editor and Publisher

16 October 2024

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.