Few things in real estate are more obviously hypocritical than real estate institutes painting themselves as consumer heroes.
In several states, real estate institutes have recently attacked state governments over stamp duty.
An article from the Jenman website.
The latest to crusade against a state government is the Real Estate Institute of Victoria, with chief executive officer Enzo Raimondo leading the charge. (It’s hard to imagine anyone who cares less about consumers than Raimondo).
The REIV points out that the State Government’s tax take has more than doubled in the past six years, fuelled by stamp duty based on rising real estate values.
As with all the institutes pretending to adopt this noble cause, they have avoided mentioning something else that’s more than doubled in recent years: real estate commissions.
Agents’ costs haven’t doubled. The amount of time spent selling a house hasn’t doubled. But agents’ commissions have doubled. This is because, just like stamp duty, commissions are based on the sale price of a home.
Many agents are getting paid twice as much for the same amount of work. Indeed, during a real estate boom, some agents don’t work, they just sit at an open-for-inspection and wait for the hordes of clamouring buyers to show up.
The president of South Australia’s real estate institute, Mark Sanderson, said that the SA Government recently has earned an extra $160 million in stamp duty compared with 2002. What he didn’t mention was that, in the same time, agents earned an extra $110 million in commission – and they sold a few number of houses.
When the West Australian institute made a fuss about stamp duty, the WA Treasurer Eric Ripper said: “If agents are worried about housing affordability, they should slash their commissions.” He was quite right.
Affordability is a huge issue in real estate and government taxes and agents’ commissions are both factors. Real estate institutes are adept at ignoring one and focusing on the other.
But Raimondo, in his supposed benevolence, has devised a four-point plan in his “demand” for “urgent reform”.
He wants the State Government to
- Set budgets that don’t rely on an increased take from stamp duty;
- Adjust stamp duty rates downwards to reflect the growth in property values;
- Adjust stamp duty to ensure a fairer spread across the housing market (he feels cheaper homes are harder hit than luxury homes); and
- Exempt first-home buyers from paying stamp duty on a median-valued house.
This isn’t a plan, it’s a self-serving wish list. The Tenants Union of Victoria has rightly accused the REIV of “shamelessly exploiting” the pain of first home buyers.
Reducing stamp duty would not make home prices more affordable, it would simply encourage more speculation, increase prices and give more commission to REIV agents.
If the REIV was serious about its plan to reduce stamp duty and help consumers, it could apply the same plan to real estate commissions.
Look how easy it would be:
Real estate agencies could
- Set budgets that don’t rely on escalating income from commission;
- Adjust commission rates downwards to reflect the growth in property values;
- Adjust their commissions so that owners of lower-priced homes pay lower commissions rates; and
- Forego their commissions when a first-home buyer buys a median-valued house.
Of course, the REIV would never suggest such a plan because it would help consumers instead of agents.
And helping consumers is never a priority of real estate institutes. The stamp duty issue is just pretence and hypocrisy.