It’s no secret the property services industry is not happy under the regulatory control of NSW Fair Trading. In the melee of media coverage, one issue keeps arising: self-regulation.
I want to be crystal clear on this: The property services industry does not seek self-regulation. It seeks a cooperative and constructive relationship with a regulatory authority who has competencies and experience in the property industry.
The value of property
NSW real estate is a $107 billion industry annually, based on the value of residential property sales each year.
It is bigger than the mining ($21 billion), retail ($22.8 billion) and tourism industries ($38.1 billion) combined.
Despite this, the property services industry is governed by the same NSW government department that oversees tattoo parlours and coffee shops.
No one needs an agent or lawyer to buy a coffee, but I do when buying and selling property.
NSW Fair Trading is not equipped to support an industry that contributes $10 billion to the NSW government every year in stamp duty and land tax. So, while the industry works to improve itself, NSW Fair Trading continues to put consumers at risk.
The stamp duty time warp
The NSW government recently announced its intention to index stamp duty to the Consumer Price Index (CPI) from 1 July 2019.
Indexing the stamp duty brackets is a positive move; however, applying it to brackets that are 32 years old — then seeking the state’s gratitude — is insulting. If the government is serious about tax reform, the indexation needs to start from the commencement date of the current brackets — 1986.
Taxation should be a consequence of a transaction, not a consideration. The declining number of transactions clearly demonstrates that consumers are avoiding stamp duty by not buying property.
The irony? If the government reduced the rates of stamp duty, it would drive more transactions and consequently more tax revenue.
Interestingly, if the CPI was applied to the 1986 tax brackets, the stamp duty payable on Sydney’s median house price of $985,000 would be $16,325, instead of $39,770 — a significant saving for NSW home buyers.
The need for better regulation
The property services industry is pushing for a dedicated and industry-experienced commissioner for the property services industry.
All industries under the regulatory remit of NSW Fair Trading face the constant threat of de-licensing their industry or substantially reducing education for entry to the industry.
Reducing standards within any industry will deliver poor consumer outcomes. NSW Fair Trading does not appear to grasp this.
With the cooperative assistance of a property services commissioner, the industry can address the impediments to housing affordability. Clearly antiquated and cumbersome development approval processes, poor and uncoordinated planning, and excessive property taxation need to be urgently addressed.
To solve the issue of incompetent governance by NSW Fair Trading, first there must be an understanding of the issues that led us here. Pretending there is no problem only delays implementation of the remedial actions desperately required.
Publicly exposing the systemic failure of NSW Fair Trading’s ability to understand and adequately support the property services industry is an important step forward. Misplaced confidence and ignorance is a dangerous combination and it will compromise consumer protection.
This is not a push for self-regulation; it’s a call for better regulation and consumer outcomes.