Property Investment Professionals of Australia (PIPA) has called for greater regulation of direct property investment advice with the introduction of minimum qualification standards that would help protect first homebuyers and remove spruikers from the market.
With the federal government flagging housing affordability as a key priority ahead of the budget next week, PIPA chair Ben Kingsley said property should not be treated as the “perfect panacea” for wealth creation in Australia, and the onus was on government and regulators to develop sensible policies and educate retail investors about the real risks of property investment.
“The main fundamental [problem] here is that there are people who are getting into property investment at the moment believing that it is the bees knees of all investing,” Kingsley told financialobserver.
“We just need to look at Storm Financial as a perfect example of why property investment needs regulation in the market … there are definitely property investors now who will lose out when the cycle comes to an end and we ultimately see a correction to some parts of the market.
“That’s why it’s so important for them to be sitting down with a professional, qualified adviser because not all property makes for sound investing … and there may be several investors across many markets who would be talked out of investing in the current [conditions].”
He said a key step toward improving levels of consumer protection for homebuyers was to classify direct property as a financial product under the Corporations Act 2001.
That would require financial advisers to have adequate training and accreditation â€“ in the form of a separate ‘diploma of property investment planning’ â€“ to be authorised to give property investment advice, he said.
It would also mean licensed real estate agents would be banned from providing property investment advice, while buyers’ agents, mortgage brokers or accountants could only be authorised to give advice upon completion of the diploma, he noted.
But raising investor awareness through education was equally important, he added.
“It’s important to understand that everyone has a role to play in educating consumers, especially around the value of this financial transaction … and I definitely think that more could be done by the government to highlight the loss ratios of most property investments,” he said.
“Advice is really important. People need to understand that property investment is a long-term financial commitment and even though we have market cycles, this current cycle for Sydney and Melbourne has almost stretched to five years. “These interest rates won’t stay low forever, so it’s very important for these households and first homebuyers to understand not to stretch themselves.”
Daniel Paperny, Financial Oberveer, 3 May 2017