Nila Sweeney| Australian Financial Review| 21 November 2019
Property investors and home buyers are being warned about the rising spruiker activity as the market recovery accelerates amid lower interest rates.
Property industry lobby groups Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) have alerted their members about the re-emergence of unscrupulous operators using industry players to sell their properties.
Margaret Lomas of Destiny Financial Solutions has been lobbying for regulations on property investment advice for years.
PIPA chairman Peter Koulizos said with property markets rebounding, fly-by-night spruikers were once more coming out of the woodwork.
“PIPA has heard of buyers being offered ‘cash back’ deals of tens of thousands of dollars to encourage them to buy inferior properties,” he said.
“Investors are being blindsided by spruikers masquerading as qualified property investment professionals.”
Margaret Lomas, founder of Destiny Financial Solution, who has been campaigning for regulation in the industry, said the link to the rising spruiker activity is the low interest rates and the recent easing up of borrowing to investors.
“The moment we see more investors getting into any market, we see the spruikers once again emerge,” she said.
Industry insiders say the return of property investors to the market has seen the rise of spruiker activity. Peter Rae
“This is because when it’s easy to invest, people are keener and therefore less careful, and so the spruiker has the chance to push over-priced property in areas with little going for them, where they receive great commissions.”
PIPA member and Sydney-based buyer’s agent Steve Waters of Right Property Group said he’s noticed a marked increase in spruiker activity over recent months.
“They’ve certainly ramped up their campaign since the building defects and oversupply issues were made public,” he said.
“We’re seeing around 10 per cent increase in the amount of offers we get to promote certain properties.
“I’m getting at least three emails each month from people offering me a minimum of 6 per cent referral commission.”
“Sometimes they call and offer to do it ‘off the books’ so there’s no documentation that such a deal has been struck.”
PICA chairman Ben Kingsley said it’s quite common for developers to offer commissions of $50,000 or more as well as gold Rolexes for help to offload sub-par stock.
Melbourne-based property advisor Nick Menz of Aspire Advisor Network is among those being targeted and enticed with a gold Rolex.
“There’s definitely been a rise in the frequency of offers over the past eight weeks as everyone is trying to jump on the good news bandwagon,” he said.
“Some emails I received offered me a gold Rolex for each contract, in addition to $10,000 commission.”
Brisbane-based buyer’s agent Simon Pressley of Propertyology said he has been getting offers of up to 13 per cent commission for a successful referral.
“The offers come as a generic email and, for all we know, it’s probably been sent to hundreds of industry people.
“The broader public won’t get those emails. What the public get is a phone call from an existing and trusted source like a mortgage broker, an accountant, financial planner and so on, who get these types of emails.
“They contact some of their own clients where there’s an established relationship in place and sort of talk them into buying this property.”
Ms Lomas pointed out that targeting people in the property industry is a well-worn tactics by the spruikers.
“You see, when things are a little more quiet, real estate agents, brokers and accountants look for ways to supplement their income,” she said.
“What better way to earn a cool $15,000 to $20,000 than to simply refer your client to the latest well-paying developer or spruiker?
“(It’s) such easy money, and the spruikers love those referrals, as investors generally trust the advice of their broker, accountant or financial planner, and believe that the investment must be a good one.”
Mr Pressley said the money being thrown at people is obscene.
“If you successfully refer two or three clients for $50,000 commission, you’re set for the whole year,” he said.
Because there are no laws in place, Ms Lomas said no one has to know just how much money is really changing hands between people.
“For 12 years I have hounded anyone in Canberra who I can get in front of – senators, ministers, the government and the opposition. But they don’t want to listen,” she said.
“Most people are horrified to know that anyone can call themselves a property investment adviser without qualifications, licensing or even a couple of regulations to govern their practices.”