Labor’s proposal to restrict negative gearing to new property will flood the market with spruikers and endanger the financial lives of thousands of Australians, according to the Property Investment Professionals of Australia (PIPA).
PIPA chairman Peter Koulizos said the policy would encourage unscrupulous operators into the market looking to take financial advantage of everyday investors.
“When you financially incentivize people to buy a particular product, spruikers are not far behind because they see an opportunity to make a lot of cash very quickly,” he said.
“PIPA was created more than a decade ago to lobby for regulation in the property investment advice space to drive out crooks from our sector and to protect consumers.
“However, there is currently no legislation to protect consumers from dodgy operators pretending to be property investment experts.”
Mr Koulizos said industry research already shows that Labor’s policy is based on incorrect modelling when it comes to the number of investors who already buy new property as well as the revenue it believes it will raise.
This will be like financially bribing naive investors
On top of that, he said, financially bribing investors to buy new property will create the ideal conditions for spruikers to flood the market.
“It will be like the pink batts fiasco all over again, which was another terrible Labor policy,” Mr Koulizos said.
“This time, it is an ill-conceived negative gearing proposal that is being rolled out too quickly and is likely to have financially catastrophic consequences for investors.
“We’re talking about people investing hundreds of thousands of dollars into properties that are likely to be over-priced and inferior in every way possible.”
He said the record $18 million fine imposed on a property spruiker for misleading property buyers and investors last year proved that urgent regulation of property investment advice is needed.
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The Federal Court imposed record penalties of $18 million against We Buy Houses We Buy Houses and its director, Rick Otton, for making false or misleading representations about how people could create wealth through buying and selling real estate, following action by the Australian Competition & Consumer Commission (ACCC).
“If Labor’s absurd policy comes in, expect more investors to lose their life savings to corrupt charlatans who have no fear of the consequences because of the lack of regulation in the property investment advice space,” Mr Koulizos said.
PIPA has developed codes of ethics and conduct, which all of its members voluntarily agree to abide with, as well as professional standards of accreditation and education for the property investment industry, including a Qualified Property Investment Adviser accreditation course, he said.
"PIPA offers investors’ confidence in a marketplace where trust is so lacking and where multimillion-dollar fines to spruikers highlight what is at stake," Mr Koulizos said.
"Whether they're looking for a property investment adviser, mortgage broker or accountant – essentially any professional involved in the property investment process – investors should look for the PIPA logo.
"PIPA members must adhere to our strict code of conduct, which offers property investors the best assurance that they are dealing with a trusted professional."
Editors note: Michael Yardney and Metropole Property Strategists are foundation member of PIPA