Real estate industry faces clamp

THE real estate industry will be further hampered if the Federal and State Governments act on the advice given by the Australian Securities and Investment Commission following a review on the industry.

The review examined the adequacy of the regulatory arrangements for real estate agents who give financial advice to people intending to buy real estate.

ASIC chairman Alan Cameron said the key finding was that, while investors were clearly looking to real estate as an investment, the regulatory regime for real estate agents was not designed with financial advising activities in mind.

“For example, investment advisers have an obligation to give securities recommendations according to the particular needs and circumstances of the investor,” Mr Cameron said.

“They must also disclose any commission or other benefit which they might receive by recommending a particular security and they must disclose any conflict of interest.

“But real estate agents who give financial advice to customers and investors are not subject to these requirements.

“This is significant, especially where the investors are retail investors and may not be as sophisticated as someone who deals in property all the time.”

The ASIC believes real estate agents who appear to give recommendations about the suitability of particular real estate investments for a particular investor should comply with similar regulatory requirements as investment advisers who give personal securities recommendations.

“These can be imposed either through State-based regulation or a coordinated national approach,” Mr Cameron said.

“Often a real estate agent will give general financial advice, such as the likely rental return or capital appreciation of the property, as an incidental to the real estate business.”

Mr Cameron believes investors will gain greater confidence in the industry as an investment alternative if the ASIC’s recommendations are implemented.

“At present real estate agents are regulated primarily under State and Territory laws,” he said.

“The problem of real estate agents giving general financial advice without suggested warnings could be dealt with under existing State-based regulatory regimes.

“It is a matter for governments to determine whether and how the ASIC’s recommendations should be implemented.

“However, the ASIC is keen to assist with implementation, including providing advice on the competencies agents need to have or acquire in order to give general financial advice.”

Real Estate Institute of WA public affairs director Lino Iacomella said the review was not of concern to real estate agents who did not give financial advice to their clients.

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