Underquoting: government proposes ban on some price advertising, agents could lose commissions

Victorians need to save for eight years to afford a home deposit, the state government claims, as a second blitz is launched to stamp out underquoting.

The crackdown on price dishonesty in Melbourne’s housing market will ramp up this weekend, following an announcement of proposed legislation to ban some advertising and increased fines for any real estate agent found guilty of underquoting.

Penalties for underquoting will be doubled to up to $30,000 and agents risk losing their commissions under proposed laws, announced on Friday by consumer affairs minister Jane Garrett, aimed at erasing the marketing rort.

Ms Garrett, who bought her home in Brunswick in 2002, said she ran the gauntlet of repeated auction disappointment and stress, and understood buyers’ frustration.

“Enough is enough – it is causing too much heartbreak out there,” Ms Garrett said.

“There are a number of reasons why we have embarked on this – [it’s a] big, hot market in Melbourne, the fastest growing city in Australia, the auction capital of the world.

“That is a big passion of mine – I just think it is heartbreaking enough, saving for eight years, getting anxious about whether or not you can afford the property, having to change your perspective – and then if you have your heart set on a community and that you can’t get in there, it is an unnecessary pain for people.”

Ms Garrett cited a 2015 ANZ research paper on housing affordability, which showed the average number of years it took a Victorian first home buyer to save a 20 per cent deposit had grown steadily to hit its highest level in almost 30 years.

In 2015, it would take a first home buyer eight years to save a deposit, up from about four years in late 1990s.

Under the proposals, real estate agents must give prospective buyers a fact sheet for any advertised property, which will include three comparable sales in the area, the suburb’s median house price and information that justifies how listed property’s price range has been estimated.

Major advertising reform has also been flagged. Under the suggested changes, only a 10 per cent price range will be allowed, banning advertisements that call for offers over a certain sum, such as “$650,000-plus”.

Agents will have 24 hours to update advertising materials if a vendor rejects an offer above the price that is listed.

Consumer Affairs inspectors will be checking auctions across Melbourne this weekend, and throughout autumn, as the audit on dodgy pricing continues.

Ms Garrett’s reforms come as Hocking Stuart in Richmond prepares to face the Federal Court in July to defend allegations of underquoting on 11 properties in Richmond and Kew.

Ms Garrett said the premise of a “hot market” had been used as an excuse by real estate agents, and their price estimates could become more accurate.

“The changes we have announced were informed by these inspections and making it about accountability for agents – put your money where your mouth is, put it down on paper why you think this is the estimated price,” Ms Garrett said.

“If there is suspicion of underquoting, it is very important proof in that process.”

A review of decades-old property laws is also underway, scrutinising legislation that covers owners corporations to land transactions. The public, as well as industry stakeholders, can share feedback.

The issues papers will be released periodically through the Consumer Affairs website.

The latest paper, covering owners corporations, including developers’ obligations, maintenance funds, pets and smoking, was released on Friday.