Property investors are at greater risk of making poor buying decisions when compared to other asset class investors because they're unable to obtain credible research advice, a survey of top Australian financial planning and accounting firms has found.
The survey, which was undertaken by property research firm Braxton Chase, targeted more than 500 individual wealth managers, financial planners, mortgage brokers and accountants during May and June 2008.
Braxton Chase director Andrew Donnelly said 90% of respondents either 'strongly agreed' or 'agreed' there is a shortfall of professional research-based advice available, while 95% said residential property spruikers are a problem for investors seeking credible and independent market advice.
The results also revealed that a vast majority of financial planners and accountants consider the property investment industry to be hampered by spruikers, and that the federal government isn't doing enough to improve the industry.
"There is often a wide consensus that residential property is a safe bet, but when it comes to making critical buying decisions, investors and advisors seem to rely on anything but cold, hard, market research," Donnelly said.
"Intangible factors such as hearsay, emotion, guesswork, newspaper headlines and persuasive pitches at property seminars run by spruikers with vested interests seem to be the only guiding lights."
Donnelly added that with such large outlays of money involved, the stakes are usually high and mistakes can be extremely costly.
"It's peculiar how people will invest in property with the attitude that because it's 'bricks and mortar' you really can't go wrong, regardless of where and when you invest," he said.
"The reality is, residential investment property should be treated as a cold, hard, financial product like shares or bonds, for which you can obtain an overload of invaluable, quality information from many sources with ease."
The survey indicates that property buyers and advisors are aware of the dangers of property investing, but they are still not doing the right due diligence because they don't know where to look.
"The clear signal is that some sort of guidance or regulation to protect residential property investors may be necessary," Donnelly said.
"Maybe a process whereby financial planners and accountants are obliged to undertake property education courses or refer clients to specialised property advice research houses as part of their clients' broader financial planning needs is a practical option. At least then property buyers can enjoy better peace of mind that they're making decisions based on solid and impartial advice from experts in the know."
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