PIPA has long argued that the government should legislate for property to be classed as a financial product when the purpose of sale is for investment. Ben Kingsley, chair of PIPA, told SMSF Adviser this would be a positive move, providing “better protection for trustees of SMSFs”.
Mr Kingsley said the push for increased regulation has been put in the “too hard basket” because the property purchasing space also encompasses other parties, such as owner occupiers, creating a grey area in defining ‘investment’.
However, he argues there is a simple purpose test which clearly categorises the nature of a property purchase.
“If you’re buying it for a capital gain or you’re buying it for a rental return, the purpose of your buying is investment,” Mr Kingsley said.
“So nice and clean, it’s very easy to define [and] it can separate people who are buying for owner occupied purposes. So we don’t think the government has an argument to say it’s a difficult thing to regulate.
“PIPA continues to lobby the government for such legislation, which would bring increased professionalism to the property investment space.”
Banks already require a Loan Purpose Declaration where the property will be used or predominantly used for investment. Property spruikers have had it too good for too long. Making them provide a Statement of Advice and subject to “best interests” requirements would clean up this space.
A great case for improved standards is being made albeit off the topic and content of the article. We all commend the skills involved in the calculation and verification of history however what is needed is a continual improvement and standards of advice that affect peoples futures. Not everyone who invests has the benefit or the resources to learn from their mistakes or misjudgments assisted by people who neither have the skills or inclination to do a professional job. In many instances people don’t get a second chance to lose all of their money based on poor advice. Someones ‘red tape’ is reason for existence of some professions. Anyone looked at the Tax Act lately.
With all due respect, if you are comparing and contrasting the tasks and duties of an accountant based in tax, audit, accounts and super with a property valuer you have no idea of the tasks and responsibilities and trust combined with damage that an accountant must perform – or a lawyer for that matter.
Investing almost always involves people making money, losing money and speculating on risk. Investors hopefully understand this – and those that dont get burned and learn fast.
Another layer of red tape is not required – unless you can SHOW significant losses from a large group to validate extra red tape on the market – a Market that already has to fight through the banks valuing and loaning on property.
Poor advice or guidance in most instances has never constituted a fraud. Not sure what article is being commented on but the one above refers to assistance to Trustee’s. Not all who are investors in this area have the benefit of specific education relating to property and therefore rely on external advice. For that advice to be of a particular standard is no big deal and should be a priority and not only for Government. The accounting profession is surrounded by a myriad of protections and barriers to entry for this very same reason. The article suggests that if you want to treat property as an investment rather than a roof over your head certain standards should exist. Makes good sense to me and really only an extension of what already exists with regard to other financial products.
David appreciate your comments. However given property is the darling of investors and that they are seeking to provide their future income in retirement from their investing, it seems the Government has a vested interest in them doing well! They will foot the bill in health care and pensions for the unethical activities of a significant group of spruikers who are separating investors from their current wealth.
An incredibly expensive alternative with added red tape for no real benefit.
Where is your data on frauds or on misdeeds by those providing the services now?
Fraud is already a crime.
Education has always been a part of good investing practices and does not require regulation. The onus, as always, is on the purchaser to be informed.
Dont expect the government to hold your hand through everything.
Definately dont expect the government to create a wall around your industry to protect you from competitors in your market – that is not what economic legislation is meant to be about.
Property Investment Advice regulation requires consumer education. Vendor’s Agents are not able to act for both the Buyer and the Seller in the same transaction! However investors don’t know this. Regulation would support impartial education for investors so they could be informed in their selection of a professional.
What we need now are educated advisors, with PI insurance for the advice and membership of a Professional Association with disciplinary procedures.
are you inferring that I am somehow afraid of scrutiny or have a “vested interest”?
Pardon me for cynicism but when will people grow up and stop expecting government to regulate everything? Or is it that some people want captive markets? When all is said and done, I suspect we would be much better off if a lot of regulators were eliminated and the money spent on basic law enforcement against fraud. All the laws and regulations on the books are worthless if they are neither intelligent, intelligible nor enforced.
The best regulators are irate empowered consumers taking crooks to Court – but how many have the means or the money? Official regulators always hesitate because they naturally do not want egg on their faces.
Finally, whatever happened to our Federal Constitution? The Federal Parliament has no clear head of power to regulate property investment.
Dr Terry Dwyer
Dwyer Lawyers
http://www.dwyerlawyers.com.au
David, the same way you measure those issues now! When property is being used as a financial product like other products it makes perfect sense to have it under the same regime. It will prevent unqualified people flying under the radar like they do now. There’s a whole lot of vested interests afraid of scrutiny and likely to fight it. Case in point.
Regulation of advice on property investment is long overdue, particularly with the amounts of borrowing involved.
Not a bad idea, but who are the experts? Definately not those who trade in the liquid market.
How is it regulated?
Would properties have a minimum earnings ratio?
How do you measure Capital from Income gains and losses as a measure of overall profitability?
It’s very easy to say, and almost impossible to do. Lobby all you like, until you can effectively answer those questions, the lobbying is meaningless (and accountants like me will fight against it).