The Labor Party’s plan to restrict negative gearing on newly built properties could lure in spruikers to the market, according to Property Investment Professionals of Australia (PIPA).
“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,” said PIPA Chairman Peter Koulizos.
Koulizos is concerned that there is currently no legislation to protect consumers from dodgy operators pretending to be property investment experts.
Koulizos said that industry research indicates 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.
In addition, Koulizos said that financially bribing investors to purchase 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,” he 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.”
Last year, the federal court imposed record penalties of $18 million against We Buy Houses and its director, Rick Otton, for making misleading representations about how people could create wealth through buying and selling real estate, following action by the Australian Competition & Consumer Commission (ACCC).
Koulizos said that the incident proved that urgent regulation of property investment advice is needed. “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,” he said.
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