NSW property reforms leave vendors, agents and tenants paying the price

This summer, the subdued real estate market will grapple with the outcomes of a fifth interest rate rise in a year.

Much has been written about interest rates being a blunt instrument when it comes to curbing persistent inflation. Amid the strong influence of various global factors, not least the high cost of oil, hiking interest rates is proving ineffective.

The Reserve Bank’s mandate is pretty clear-cut. If inflation is too high, increase rates. The fact that such a move disproportionately impacts mortgage holders is not the RBA’s concern.

But the ramifications are everyone’s concern. The risk of recession grows, unemployment rises, and even NSW Premier Chris Minns concedes that there will be some “shops that close that do not reopen”.

Shame the government hasn’t shown the same concern for real estate businesses. Those businesses which make up an industry employing some 60,000 people in NSW.

There is significant pain in the community. This goes for all consumers.

And yet, the NSW Government routinely forgets that people who own a property or have a mortgage over one are consumers too.

How else do you explain the absurd reforms coming into effect in the state?

With its new price disclosure reforms, government’s ignorance of the market and unwillingness to genuinely engage with industry will result in harm spread evenly across both vendors and purchasers.

The government’s solution only works in a rising market. A vendor should not be prohibited from seeking the market price for their property. In a distressed market, that may be less than the market would have paid at the beginning of the marketing campaign.

Practical examples of the shortcomings of the reforms are plentiful. A vendor may need an urgent sale because of illness, the need to move quickly, a sudden change in financial circumstances (remember, rates are rising), or countless other reasons.

Yet, because a vendor has refused an offer, the agent cannot advertise a price lower than the rejected offer, despite the market moving downward.  

If an agent determines the estimated price to be $1 million and the vendor wants $1.1 million, the agent must advertise the property at $1.1 million. That makes sense. However, if the vendor’s circumstances require a quick sale or the market declines and the vendor instructs the agent to advertise the property for $900,000, the agent cannot follow that instruction. The agent must advertise the property for $1 million.

In a free market, government should have a light regulatory touch. To do otherwise causes more problems than it solves.  

For vendors, it’s so important to work closely with your selected agent and take heed of the pricing advice they provide.

It is an inexact science, a point government has always failed to grasp, but vendors and agents will need to – as best they can - guard themselves against the need to re-advertise the price of a property if a higher price has been rejected earlier in the campaign.

Of course, there is no playbook for this. Asking an agent to predict the future is unreasonable. It’s no wonder so many people feel abandoned by government policy.

Rental ramifications

Counting themselves among the ranks of the forgotten are tenants.

In NSW, we have an entrenched rental crisis. The fault lies largely with the NSW Government.

The failure to foster, over many years, an environment in which housing supply can be delivered in line with increased housing demand.

The failure to recognise that investors are consumers too, they are making their properties available for people to rent, and if you push them away, they will invest their money elsewhere.

The disingenuity in demonising landlords, as though it will help tenants, when these investors do leave the market.

The disingenuity of government claiming it is fighting for tenants’ rights when in effect, it is robbing tenants of choice.

The failure to grasp that applying more tax to an investment class negatively impacts the attractiveness of investing in it.

The list goes on. The pain of the forgotten does too.