Key takeaways
NSW's new price disclosure reforms could disadvantage both property buyers and sellers.
The restrictions may prevent agents from advertising prices that reflect changing market conditions.
Vendors need flexibility to adjust their price expectations. A previously rejected offer shouldn't prevent sellers from lowering their asking price.
Buyers could miss out on affordable properties. Inflated advertised prices may discourage purchasers from inspecting homes within their budgets.
The reforms are particularly problematic in a falling market. Sellers increasingly need to adjust their expectations as buyer demand weakens.
Greater price transparency is important, but the rules need refining. Genuine, documented price reductions should be permitted while maintaining protections against underquoting.
Imagine putting your home on the market, rejecting an offer because you believe it's worth more, and then discovering a few weeks later that you're effectively prevented from advertising it at the lower price that you're now prepared to accept.
It sounds ridiculous, doesn't it?
Yet that's precisely the situation some NSW property sellers could find themselves in under the State Government's new price disclosure reforms, which are due to commence this month.
And while I understand the government's intention to improve transparency and protect buyers from misleading price guides, I'm concerned that these changes could create unintended consequences, particularly in a property market where prices are falling and vendors are increasingly having to adjust their expectations.
In fact, the Real Estate Institute of NSW (REINSW) has warned that the reforms contain major flaws that could disadvantage both buyers and sellers.
And I think they have a point.
The problem with the new price disclosure rules
Under the proposed changes, real estate agents will be restricted from advertising a property at a price below a written offer that the vendor has previously rejected solely on price.
On the surface, that might seem reasonable.
After all, we've all heard stories of properties being advertised at unrealistically low prices to attract buyers, only for those buyers to discover that the vendor expects considerably more.
Underquoting has been a longstanding frustration for Australian homebuyers, and I certainly support measures that improve transparency and ensure buyers aren't wasting their time and money pursuing properties they have little chance of purchasing.
However, there's a fundamental problem with the government's approach.
Note: Property markets are constantly changing, and so are vendors' circumstances and expectations.
A seller might reject an offer of $1.5 million early in a marketing campaign because they genuinely believe their property is worth $1.6 million.
But what happens if, six weeks later, the property remains unsold, buyer interest has weakened, and comparable properties are selling for less?
The vendor might now be perfectly happy to accept $1.45 million.
Yet under the new restrictions, the agent could be prevented from advertising the property at that revised price because the vendor previously rejected a higher offer.
In other words, the advertised price could end up being higher than the amount the seller is actually prepared to accept.
Surely that defeats the whole purpose of improving price transparency.
Vendors need flexibility, particularly in a falling market
REINSW CEO Tim McKibbin has been particularly critical of the changes, arguing that the government has overlooked an important principle: vendors are consumers too.
And he's right.
We tend to focus on protecting buyers when discussing property legislation, which is understandable given the financial commitment involved in purchasing a home.
But sellers also deserve protection and the flexibility to respond to changing circumstances.
A vendor might suddenly need to relocate for work, face unexpected medical expenses, experience a relationship breakdown or encounter financial difficulties that make selling quickly a priority.
Alternatively, they might simply recognise that their initial price expectations were unrealistic.
In each of these situations, the seller should be able to adjust their asking price to reflect their new circumstances and the realities of the market.
McKibbin warns that the reforms could effectively force agents to advertise properties at prices that no longer reflect what their vendors are prepared to accept.
That's particularly concerning in the current environment, with higher interest rates, reduced borrowing capacity and softer buyer demand placing downward pressure on property prices.
Note: A rule designed around rising prices may be poorly suited to a market where sellers increasingly need to negotiate downwards.
And that's where the unintended consequences become apparent.
Buyers could miss opportunities too
While the reforms are intended to protect purchasers, they could actually discourage some buyers from pursuing properties they can afford.
Consider a property advertised at $1.6 million, even though the vendor has revised their expectations and would now accept $1.45 million.
A buyer with a maximum budget of $1.5 million might never inspect the property because the advertised price suggests it's beyond their reach.
Meanwhile, the seller misses an opportunity to attract a genuine purchaser.
Neither party benefits.
There's also an unresolved question about whether vendors would be permitted to communicate their revised price expectations directly to prospective buyers when their agents are restricted from doing so.
That sort of uncertainty is hardly conducive to a transparent and efficient property market.
Good intentions don't always produce good legislation
Now, I don't believe we should abandon efforts to improve price transparency.
In fact, I'd argue that greater transparency is essential to maintaining confidence in Australia's property markets.
But legislation needs to recognise how property transactions actually work.
Property prices aren't fixed, and a vendor's expectations at the beginning of a campaign may be very different from their expectations several weeks later.
A more sensible approach would allow vendors to revise their advertised prices when their circumstances or market conditions change, provided those revisions are genuine, properly documented and communicated transparently to prospective purchasers.
This would preserve the government's objective of preventing misleading price advertising while allowing buyers and sellers to negotiate based on current market conditions.
Importantly, it would also recognise that a previously rejected offer is historical information, rather than a permanent measure of what a property is worth.
The bottom line
Over my five decades of investing in property, I've seen plenty of well-intentioned government interventions produce consequences that policymakers clearly hadn't anticipated.
And I suspect these price disclosure reforms could become another example unless the NSW Government listens to the industry's concerns.
The REINSW has called for the changes to be reconsidered before implementation, and I believe that's a reasonable request.
After all, buyers deserve accurate information, sellers deserve flexibility, and agents need clear rules that allow them to represent their clients honestly.
The good news is that the problem appears relatively straightforward to address.
By allowing genuine, documented price revisions while maintaining strong protections against deliberate underquoting, the government could achieve its transparency objectives without unnecessarily restricting property transactions.
And that's the outcome we should all be working towards.
Because ultimately, a healthy property market depends on informed buyers, realistic sellers and a regulatory framework that allows both to make sensible decisions as circumstances change.
