Have you noticed a shift in the real estate landscape? It’s not as obvious as the San Andreas Fault or major earth fissures that split the ground with catastrophic results; but in my mind, it is a seismic shift. In fact, when you consider the economic and social implications, it feels as though some decision-making around policy is akin to someone playing with the weather.
The shift is away from caveat emptor, a Latin term meaning ‘let the buyer beware’ and a doctrine that historically has implied the buyer assumes the risk for the quality and condition of goods bought unless protected by a warranty. The opposite of caveat emptor is caveat venditor, ‘let the seller beware’.
In our world, the shift from caveat emptor to caveat venditor is being driven by various stakeholders, including governments, financial institutions, regulatory bodies, and lobbyists, each playing a distinct role in advocating for stronger consumer protections in real estate transactions.
Governments and regulatory bodies are enacting laws and regulations that mandate sellers to disclose certain information and government agencies push for more stringent rules to protect real estate buyers. As consumer advocacy groups and lobbyists push for stronger legal protections for buyers, their efforts often result in new laws or amendments that tip too far. It’s a ripple effect that is being felt in many industries, not just real estate.
The private property investor sector is what is keeping the housing cycle fluid in this country; the crucial role of private property investors to our economy and our governance is significant and multifaceted, impacting on housing supply, economic growth, tax revenue and financial markets.
The legal obligations to disclose all known issues can be onerous and the costs to meet regulatory requirements high. Rental properties should meet fair and reasonable standards, but not through such a heavy burden on the property investor that the entire system unravels.
The shift to caveat venditor is having a significant impact on the investor market reshaping how transactions are conducted and how risks are managed.
Measures being introduced now are mostly inconvenient but if governments, regulatory bodies and lobbyists keep pushing, they may become catastrophic.
The goal is not to spark panic or fear, but imposing too many regulations on property investors and sellers could trigger a butterfly effect.
Stricter regulations might reduce the number of rental properties as investors exit the market or choose not to expand their portfolios. A decrease in the rental housing supply could lead to higher rental prices, exacerbating housing affordability issues.
Renters will struggle to find affordable housing, leading to increased demand for government assistance and social housing; this is just one example of how policy change can trickle down through real estate, impacting on our country’s social landscape.
One thing we do know about Australian real estate is that it is one of the most stable and best performing assets on the investment spectrum, and one of the greatest contributors to an individual’s financial future after working life.
The shift to caveat venditor in real estate reshapes the responsibilities and expectations within the transaction for sellers, buyers and agents. A landscape where sellers are held to high standards of transparency and accountability is well received – one that sees adequately protected buyers alongside sellers acting in good faith – but the power dynamics in real estate transactions must be balanced.
Private property investors are essential to the economy. Their activities have widespread implications, and they should be seen as key stakeholders in both economic and policy discussions.
Over-regulating property investors and sellers could lead to a cascade of economic, social, and political consequences.
Increased engagement from the government directly with industry bodies will not only open the lines of communication, but work toward practical and potentially more pragmatic and forward thinking solutions.
Without that engagement, the decision making is potentially limited or flawed. I think everyone can agree that less reactive policy making that takes into consideration the interest of all stakeholders, is in everyone’s best interest.
Don’t mess with the weather!
