Strict rules protect sellers from ‘flipping’ danger
Given the sale or purchase of a property is the largest and most important transaction most of us ever undertake, it’s not surprising that events in the property market attract so much attention. Some issues, like the controversy around “flipping” houses for quick gain seem to draw more heat than light.
We at the Real Estate Institute of New Zealand (REINZ) are in a unique position to provide some perspective. We have more than 15,000 agency members making up around 97 per cent of the industry in New Zealand.
According to our latest statistics, in the past 12 months a total of 88,600 houses were sold nationally. Our analysis shows that less than 2 per cent of homes sold were put back on the market within a year. So the overwhelming majority of transactions would appear to be made by people with long-term horizons.
Of the 2 per cent there is little concrete visibility of the reasons for selling. Clearly, in buoyant markets there are those who will look to speculate to make quick gains — but they are very much in the minority. One associated data point that we do have is that in upcycles houses sell quicker — for example, in 2016 it took on average around 30 days to sell a house; whereas at the turn of the millennium when we were coming to the end of a down cycle it took around 50 days.
A key issue for REINZ is whether there has been improper behaviour by an agent selling a property, as implied in several articles on “flipping”. Like other professional bodies we have rules that agents must abide by. An agent must act openly, ethically and honestly in their dealings with all parties and must avoid acting in a way that might bring the real estate profession into disrepute.
More specifically to the question of “flipping”, under legislation agents are required to provide a vendor with a property appraisal, which must be in writing and supported by comparable information on sales of similar properties. This provision is designed to prevent under- or over-valuing of properties.
The ultimate penalty for those who transgress from the industry’s regulatory requirements is the loss of their licence and employment. REINZ welcomes wellfounded external scrutiny of the industry. On that basis we welcome the current investigation undertaken by industry regulator the Real Estate Agents Authority into allegations of “flipping”.
Not all sales go through agents. Private sales, for example, are not captured in our data — such transactions operate outside the REINZ code of conduct protocols and thus might involve sales at the speculative end of the spectrum.
The vast majority of property experiences are good — with many people using the same agency for a future transaction. But it needs to be highlighted that agents have no control over the factors that drive a market up or down.
In New Zealand we have been experiencing a sustained period of strong price growth which is generally positive for sentiment. This growth has been driven by factors such as large immigration flows, people returning home and low interest rates, as well as normal population growth. But there have been and will be periods of lean times. Agents are paid only if houses sell, so are as affected as anyone in a downturn.
Whatever the market sentiment, the bottom line is that agents are governed by a strict regulatory framework to ensure the right protections are in place for consumers. Those who buy or sell their property privately will not benefit from the protections of dealing with a licensed real estate agent and thus are more exposed to issues such as “flipping”.
For those who are seeking to make quick gains from property speculation, New Zealand tax legislation will apply to any profits made. From a community perspective, REINZ can confidently say that the vast majority of the 88,600 real estate trades over the past year have been conducted professionally; as has been the case in previous years.