Property investors being duped into buying overpriced off-the-plan apartments by scam artists: Terry Ryder
Property investors are being duped into buying overpriced apartments off the plan by “advisers” who earn kickbacks – as much as $35,000 per sale – from developers.
Accountants, financial planners, real estate agents, marketers masquerading as buyers’ agents and other so-called advisers are all in on the scam.
When a response to this widespread problem was sought from the Queensland Fair Trading Minister Jarrod Bleijie, his reply was: “This is not an issue that has been raised with us by the real estate industry.”
His response was, frankly, pathetic. And so typical of the failure of politicians to understand what’s wrong with the real estate industry. The industry has not raised this issue with the minister because the industry is the problem.
Key elements of the industry – developers, real estate agents and marketing companies – are all benefiting from the rip-off of property consumers.
It’s like a government saying it won’t take action on the illegal drug trade because the Mafia hasn’t raised it as an issue.
This, sadly, is a standard response from state politicians when they're asked to address issues in the real estate industry.
Each time a state government has legislated to supposedly protect real estate consumers from shonky practices, they have primarily consulted the people causing the problems: the agents and the developers – who are, not coincidentally, a major source of donations to political parties.
The resulting laws seldom address the core issues or properly protect the consumer. Nor are the laws enforced in any meaningful way.
These issues have been around for decades, but these most recent concerns about kickbacks to advisers were prompted by Brisbane-based property analyst Simon Pressley, recently named Australian Buyer’s Agent of 2012.
When I spread his and my concerns via social media, it provoked strong and immediate reactions from many others around Australia with similar concerns. There’s no doubt this is a national problem, with ramifications for federal and state governments.
In New South Wales, mortgage adviser Kim Wight says she has been warning investors for years and has no doubt people are getting ripped off.
“Often advisers will justify in their own mind that they are acting in the best interest of their clients, but how can that be when thousands of dollars are changing hands, and in most cases not disclosed to the clients?” she says.
“If advisers were acting in the best interests of the investor, they would either ask that the kickback or commission be given to the client or deducted from the property price.”
The ASIC was asked to comment but ducked the issue, citing the legislative hole Pressley and others are campaigning against. We received a general statement from ASIC, including: “ASIC does not have responsibility for direct property investment… Any changes to the current laws around property regulation are a matter for government.”
In Queensland, Bleijie simply confirmed that everything is under review: “The Newman government is reviewing the Property and Motor Dealers Act with a view to splitting the legislation along industry-specific lines.”
A second request to Bleijie was for a more specific response to concerns that advisers are being paid to sell properties to clients without holding a real estate licence: “This is not an issue that has been raised with us by the real estate industry,” he said.
Predictably, other industry bodies are also very tight-lipped. Accountancy firms are participating in these kickback schemes, but the Institute of Chartered Accountants sent a short email stating: ”Unfortunately we’ll have to give this one a miss… Appropriate spokespeople are on interstate travel.”
Apparently the bean counters haven’t caught up with modern gadgets like mobile phones and laptop computers.
Given that our institutions are unable or unwilling to protect consumers, buyers need to protect themselves by asking searching questions of anyone who advises them to buy a particular property.Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.
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