THE OWN GOAL THREATENING BRISBANE'S HOUSE PRICE BOOM
There is a lesser reported threat to Brisbane’s nascent house price boom out there and it’s coming from an unlikely quarter.
In keeping with history, now that our feeder markets Sydney and Melbourne have finished their cyclical booms leaving our seemingly unsustainably cheap by comparison, our market has started its run.
As with all previous price driven cyclical catch-ups or rebalancings, ours has started at the lower end of the market from where it will make its way up the price ladder progressively over the next 2 – 3 years adding along the way between 50 and 100% of value to most if not all house price brackets as it goes until it reaches the very top end and stops.
That has been for case for past booms here as well as the recent ones in Sydney and Melbourne, and just like them once we reach our new peak, we will settle into our new price norm somewhere just off the new peak.
Our cyclical rebalancing is already well underway with near ring entry level houses and land selling incredibly quickly and for fast rising prices and it won’t take long for this impetus to put upward pressure on the next tier as we follow the well worn path of past booms.
So what is the own goal threatening our housing markets’ deserved time in the sun?
It’s not Labor’s intended unwinding of negative gearing, mortgage stress, the Bitcoin | Cryptocurrency meltdown, interest rates, the great Chinese retreat, falling inflation, APRA’s ill-timed, ill-conceived and illogical intervention, the equally damaging Banking Royal Commission, or even the investment apartment glut (most of these own goals as well). These are all known and have been factored in.
So what is it then….?
IT'S ACTUALLY US REAL ESTATE AGENTS UNDERSELLING PROPERTY
Yes, agents operating at the currently quieter higher end of the market but who in the halcyon times before APRA’s intervention, the Banking Royal Commission and the Chinese pullback had grown faster than they should and taken on debt and overhead they shouldn’t not being able to hold out for the 2 years or so it will take for the boom to make its way back to the higher end have started panic selling to try and keep their doors open.
So what is panic selling? Put simply it’s trying to sell more properties in the same or less time.
How do you do that? It’s not easy! Certainly not honestly and professionally…
Which is why that old market nemesis but well documented shortcut to a quick sale UNDERQUOTING has again raised its ugly head here in Brisbane after a long and welcome absence.
Yes underquoting, that malicious form of bait advertising and scourge of the 1980’s and 1990’s that we had thought long dead and buried (and long declared illegal given it deceives the public and rips off sellers) which in the right (wrong) hands of anyone with the immoral stomach for it can accelerate sales rates (‘hang the consequences for the seller’) has recently risen phoenix like from the grave, first in the southern capitals and now according to the Office of Fair Trading here as well.
The Office of Fair Trading is rightly concerned
Given how hard underquoting is to prove though where beyond compelling evidence it needs the committed co-operation of both the buyers and the sellers disadvantaged, it is no surprise that the OFT here has thus far only successfully prosecuted one serious case which was earlier this year in the $12,960 penalty it slapped on a high profile Brisbane real estate agent, this achieved despite a very ardent legal defence.
South Australia’s Consumer Affairs Office is so concerned by its re-emergence there it is asking the public and other agents directly to dob in the crooks.
Consumer affairs commissioner Dini Soulio said that while most agents abide by the law, there are some who will flout it. In order to protect sellers he is calling on other agents to call them out.
‘It’s unacceptable, unethical behaviour which is why we’re encouraging people both in the sector and consumers to come forward and help us stamp out underquoting’.
As part of their concerted campaign to clamp down on the unconscionable practise, they are contacting all 6,000 licenced real estate agents and sales representatives to reaffirm the need to report underquoting.
Their industry body the REISA (our REIQ equivalent) supports the initiative with its CEO Greg Troughton going on the record to denounce the sordid practise and stating ‘those who underquote should face the consequences’
In South Australia agents advertising or quoting prices less than that agreed with owners can face penalties of up to $20,000 or imprisonment of one year.
We could take a leaf out of their book.
Our industry body also needs to step up
First and foremost the REIQ as our peak industry body has to step up and go on the record to unequivocally denounce the grubby practise for what it is. To date they haven’t done that, at least not publicly, instead oddly staying completely mum on the subject and the public prosecution despite a number of approaches from the media and pressure from its members to comment.
They need to. Whilst denouncing it publicly may put the REIQ temporarily offside with the powerful franchise group the agents implicated belong to, it will send a clear message to the public and to the REIQ’s broader membership of their impartiality and genuine commitment to keeping the real estate business as clean and as transparent as possible.
What it might also achieve is change the way agents are trained and think, and finally kill off forever that ridiculous sales training lie ‘quote low and watch them go, quote high and watch them die’ that has by its very nature in the minds of too many agents encouraged if not almost legitimised the scurrilous act of underquoting property prices.
How can the public help (even if the industry won’t)?
They can up the ante on calling out the malpractice as recommended by the REISA by not just reporting any new incidences but also any past ones as there is no statute of limitations. Also, where the OFT doesn’t prosecute for any reason, take the matter to the media (particularly programmes that specialise in outing unconscionable conduct) where there is a growing appetite for it.
So will it take a damning expose on Four Corners or A Current Affair or similar to fully and finally stamp out this resurgent threat to our market (indeed all markets)?
We hope not but it ultimately may (indeed they could already be underway) but we can’t or don’t have to wait for them. We can take significant steps to nip the nascent problem here in the bud ourselves.
Sellers can help (themselves) too in other ways. Where they harbour genuine concerns that their agent may be underquoting the agreed price or price range (or if being sold without a price, quoting a price or a price range, which is also illegal), they can get friends to call the agent posing as a buyer to enquire about the price (or price guide) of the property and report back to the owners just what the agent said.
Of course agents acting illegally rely on the fact that the vast majority of sellers would either not be comfortable doing that or simply wouldn’t think of it but that is all the more reason to consider it.
The price of not doing anything…?
An unnecessary negative price spiral. The lower the price agents quote on a property, the lower the price it sells for (despite what some agents would have you believe) to drive that sector of the market down. The further the market is driven down, the more the banks feel vindicated for having made it harder to borrow and the more they’re encouraged to tighten further. The harder it gets to borrow, the more those same agents feel disposed to quote lower still (blaming the market for doing so).
It’s a vicious circle and one the Office of Fair Trading is very aware of which is why they are taking action.
With the help of the public and we trust soon of our industry governing bodies, the isolated incidences of underquoting we have seen so far will be the only ones and one less significant but totally unnecessary impediment to our market enjoying its normal cyclical catch-up and rebalancing with the other state capitals will be eliminated. That has got to be a very good thing.
JOHN JOHNSTON - CEO