Property advice regulation and legislation is not enough to protect consumers: Terry Ryder

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.

So, essentially, nothing has changed. Dummy bidding is still part and parcel of the auction process. Agents still over-quote to win listings and under-quote to attract auction crowds. Crooked operators continue to run seminars which promise to make people overnight millionaires. Shonky businesses still claim to possess “wealth secrets” which they will reveal for a hefty fee. Marketing operations receiving huge commissions from developers continue to describe themselves as “buyers agents” or “clubs” purporting to represent the interests of buyers.

As I recorded in a previous column, the Melbourne Home Show in August was teeming with dodgy operators seeking to exploit consumers rather than provide genuine services.

If anything, matters have got worse. It’s an open secret that accountants and financial advisors, with all the required qualifications and registrations, earn commissions of up to $35,000 per deal whenever their clients buy developer stock. Not only is the advice based on vested interests, but the consumer is paying a price inflated by the outrageous marketing fees – and invariably in a project located in an under-performing market, because developers need to pay massive commissions only when they’re struggling to sell their stock.

We have developers building high-rise apartments in over-supplied markets because they can sell them at inflated prices to uninformed distant investors. In the late 1990s and early 2000s they went interstate or out west to find gullible punters. Now they take roadshows to China. Then they run ads telling Australians they should be buying because the Chinese are – and we all know how much research the Chinese do.

The problem with regulation is that it’s only as good as the enforcement. And, across Australia, there are few government bodies willing to take responsibility for enforcing laws designed to protect real estate consumers. All states and territories have offices of fair trading or consumer protection but, with the exception of the Western Australia body, they are all toothless tigers.

The only way real estate consumers will be protected is through education. Real estate needs to be taught in schools. It’s a basic life skill everyone needs. Everyone will become a tenant, so we need to teach the rights and responsibilities of tenants, and two-thirds will eventually become home owners. Many will seek also to be investors.

But, as I observe day after day, most wannabe investors have little idea on how to proceed. They don’t have clear objectives, nor strategies for achieving the objectives, nor an understanding of finance options, nor the first clue on where to go for the information they need to make informed choices about what, where and when to buy.

The lack of knowledge displayed by most real estate consumers is little short of tragic.

We will never be able to pass laws to adequately protect Australians from the rip-off merchants who prowl the real estate industry. The best we can do is give them some tools to protect themselves by providing a basic real estate education, starting in high school.


Terry Ryder is the founder of hotspotting.com.au and you can contact Terry via email or on Twitter.

Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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