Regulating the overseas property industry.

R

Rosinsky

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I have spoken to many individuals in relation to the topic of regulation of the overseas property industry. We have had so many problems relating to miss selling, agents providing financial advice ( when not qualified to do so). Yet with so many individual squanderring their life savings nothing has been done.

Is it a matter of the government not wanting to make foreign property investments safer because more money would leave Ireland?

Also, regulation would require transparency in relation to commission received - would the agents be happy to comply?

Regulation would also imply a standard due diligence requirements. Would agents take on this cost and take responsibility? Would the developer be happy to supply all the needed information?

I have to say a standard would save me a hell of a lot of time and money researching.

I am of the opinion that there should be a minimum competency requirement like the QFA but for property and that it is the time to have standards set accross board.

Overseas property investment is a personal investment product that should also be backed by some minimum compensation award if it results in losses due to bad advice. I do understand that the property markets are very unpredictable and can be high risk; however, a most suitable investment should only be recommended. Building a property portfolio can generate healthy income; however, to gear someone up to the brim to invest in Turkey, Bulgaria etc etc is madness.
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The overseas property market has been good to many of us and the average individual should be able to reap the benefits on the condition of receiving high quality advice based on their risk and financial capacity and to purchase without persuasion!

My views are very strong on this matter and I would like to hear posters thoughts.
 
Where is the benefit to the State in State regulation of the foreign property industry?
 
Stifster said:
Where is the benefit to the State in State regulation of the foreign property industry?
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Protecting the end user / consumer.

Tax! The revenue in most circumstances have no idea where the money is invested in overseas property. Many are getting away without filing tax returns. Only if you are investigated may they uncover property acquisitions in far off destinations.

Another good example is also the first time buyers status. This is done in utmost good faith. In otherwords, an individual ( first time buyer) is exempt form stamp duty - meanwhile they may have bought abroad already. Of course if investigated the stamp duty will be clawed back.
 
That isn't what the original post was suggesting at all. Regulating the indsutry isn't the same as regulating (or keeping a register of) those who use the industry's services.
 
Stifster said:
That isn't what the original post was suggesting at all. Regulating the indsutry isn't the same as regulating (or keeping a register of) those who use the industry's services.
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At minimum the end user / consumer should be protected.
 
It would be a very difficult product to regulate. We don't really have any control over what happens in Cape Verde, or Turkey or Florida.

We could try to get EU cooperation to control investment in EU countries.

But we would then have to regulate the Irish property industry.

Regulation comes at a huge cost. This cost is ultimately paid by consumers in terms of higher prices.

Instead of regulation, I do think that the National Consumer Agency should take a very proactive educational role in the area. It should also go after companies using unfair selling practices in Ireland. It has very strong powers under the Consumer Act, but it has yet to use them in this area.

Brendan
 
Brendan, while I agre that going after coming selling under not exactly honest or fair ad's etc, certain big companies still escape sanction, certain air transport companies come to mind, and one gripe I've always had with property in general, and especially overseas stock, is that hidden costs are not presented properly until the last possible moment.
 
It would be a very difficult product to regulate. We don't really have any control over what happens in Cape Verde, or Turkey or Florida.
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We would disagree with this statement. Governing the overseas property industry here is more a case of governing those selling into the Irish market, what they do here and what they claim for the products they promote here.

Each foreign market, wherever it is, has its own controls to govern purchase of property there, whether by foreigners or locals. Admittedly some are better than others, but there are controls of some description nonetheless.

Most problems actually arise from claims made by, and actions taken by, agents promoting overseas property in Ireland rather than those building it abroad. Those agents active in the Irish market can, and should, be regulated by the Irish government if it is to be seen to protect its citizens and their investments in the way that it has done in the financial markets.

The argument that it is not in their interest to do so is void. Much of the money spent abroad is borrowed in Ireland, income made overseas will often be spent in Ireland. The revenue makes significant income from gains made by those investing overseas (non-declaration is a debate for another thread). There are many stakeholders in Ireland who stand to make considerable gains if the market here were regulated properly, not least the citizen who is purchasing property abroad.

Most overseas investments are, in fact, transactions taken in the hope of making financial gain, there is no reason why those promoting such products should not be exposed to legal and financial scrutiny, regulation and licencing.

We would hope to lobby the government early in the New Year to at least heighten the level of awareness at cabinet level of the devastation that the lack of regulation in this market has wreaked on so many individuals. We feel this is an opportune time for such action as the issues are highly visible at present with the Michael Lynn/KenDar fiasco lingering in the national media.

Suggestions as to the content of the submission would be greatly appreciated both from end users and professionals in the industry. We are currently speaking to both FOPDAC and AIPP in the UK who have already made similar submissions to the UK government with varying degrees of success. We can be contacted on info@OverseasCafe.com.
 
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OverseasCafe said:
We would disagree with this statement. Governing the overseas property industry here is more a case of governing those selling into the Irish market, what they do here and what they claim for the products they promote here.

Each foreign market, wherever it is, has its own controls to govern purchase of property there, whether by foreigners or locals. Admittedly some are better than others, but there are controls of some description nonetheless.

Most problems actually arise from claims made by, and actions taken by, agents promoting overseas property in Ireland rather than those building it abroad. Those agents active in the Irish market can, and should, be regulated by the Irish government if it is to be seen to protect its citizens and their investments in the way that it has done in the financial markets.

The argument that it is not in their interest to do so is void. Much of the money spent abroad is borrowed in Ireland, income made overseas will often be spent in Ireland. The revenue makes significant income from gains made by those investing overseas (non-declaration is a debate for another thread). There are many stakeholders in Ireland who stand to make considerable gains if the market here were regulated properly, not least the citizen who is purchasing property abroad.

Most overseas investments are, in fact, transactions taken in the hope of making financial gain, there is no reason why those promoting such products should not be exposed to legal and financial scrutiny, regulation and licencing.

We would hope to lobby the government early in the New Year to at least heighten the level of awareness at cabinet level of the devastation that the lack of regulation in this market has wreaked on so many individuals. We feel this is an opportune time for such action as the issues are highly visible at present with the Michael Lynn/KenDar fiasco lingering in the national media.

Suggestions as to the content of the submission would be greatly appreciated both from end users and professionals in the industry. We are currently speaking to both FOPDAC and AIPP in the UK who have already made similar submissions to the UK government with varying degrees of success. We can be contacted on info@OverseasCafe.com.
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Would regulating the market not be in conflict to the business of FOPDAC and AIPP? In otherwords, is there going to be any need for them if the market is regulated? (I understand these organisations are a form of self-regulation and that they charge fees for a membership which would qualify a company as a reputable comapany??)

As a matter of interest, who is behind Overseascafe? Do you have backgrounds in the financial services? Are there any estate agents directly involved in your company as shareholders of any kind?

It would be great to raise awareness and I do believe it would contribute a hell of a lot and be in the best interest of everyone. Would be interesting to see how you get on.
 
I can't see how you could effectively regulate this industry. Even if you took steps to regulate those who are active in Ireland, how could you regulate those who never set foot in Ireland, e.g. those who operate over the web?

Why should the overseas property market be regulated when the domestic property market is largely 'wild west' territory?
 
RainyDay said:
I can't see how you could effectively regulate this industry. Even if you took steps to regulate those who are active in Ireland, how could you regulate those who never set foot in Ireland, e.g. those who operate over the web?

Why should the overseas property market be regulated when the domestic property market is largely 'wild west' territory?
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I think the second point is better made than the first - getting our own house in order would be a good idea.

For the first point, many (to my mind foolish) people put down deposits at or based on roadshows, personal visits to solicitors offices, probably at based on accountants recommendations (not to cast dispersions on any esteemed posters here!) etc. Making it harder for fools to be parted with their money together with an educational campaign would surely be in the consumer's interest?

But then the same basis, as you rightly point out, applies to 'consumers' taking on loans they can't afford in the domestic market for 'investment' properties they won't make a penny on in their lifetimes!
 
The objective rationale for regulating any financial market lies in the fact that the asymmetrical levels of information possessed by sellers and buyers gives rise to market failure. Few financial markets fit this criterion more closely than investment in foreign property.
There are no legal or other impediments to regulating the marketing of foreign property to Irish residents by estate agents located in Ireland or outside Ireland. Firms that do not market into Ireland but are merely approached by Irish residents could not be regulated.
Brendan's suggestion that "Regulation comes at a huge cost. This cost is ultimately paid by consumers in terms of higher prices." is very odd. There are of course costs associated with regulation, and these are borne by consumers, however the key question is not whether or not regulation costs but whether or not it give rise to benefits. If the benefits outweigh the costs then the regulation should be introduced, if not then it should not.
 
Rosinsky said:
Would regulating the market not be in conflict to the business of FOPDAC and AIPP? In otherwords, is there going to be any need for them if the market is regulated? (I understand these organisations are a form of self-regulation and that they charge fees for a membership which would qualify a company as a reputable comapany??).
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The vacuum caused by lack of regulation in the marketplace is what led to the formation of FOPDAC (now NAEA Overseas) in the seventies and AIPP a few years ago. Both are involved in self-regulation of the marketplace and neither is a 'for profit' organisation, they collect subscriptions to cover their costs. Both operate on the assumption that a company is entitled to be a member unless they have a strong reason to believe that they are operating in a manner that contravenes the organisation's rules or they have a formal complaint upheld against them. While there is nothing wrong with either organisation they are no substitute for legally enforcable regulation and both are aware of this fact.

It is among the stated aims of both organisations to lobby for legally enforcable legislation to regulate activity in the overseas property industry. All their efforts so far have been directed at the UK market and neither has been particularly successful to date, but it hasn't been for the lack of trying.

Rosinsky said:
As a matter of interest, who is behind Overseascafe? Do you have backgrounds in the financial services? Are there any estate agents directly involved in your company as shareholders of any kind?
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The directors of OverseasCafe are three former directors of overseas property companies in Ireland, all of whom have significant agency experience in the market and who are all still involved in the overseas property industry, but not at the sales end. They are MD Eilís FitzGerald and fellow directors Diarmaid Condon and Raymond Norton. None of the three have backgrounds in the financial services sector.

I can't see how you could effectively regulate this industry. Even if you took steps to regulate those who are active in Ireland, how could you regulate those who never set foot in Ireland, e.g. those who operate over the web?
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Regulation of entities outside of Ireland do indeed pose a trickier problem than those with offices in the country. There is already some regulation governing those advertising in Ireland, wherever they are located, which has been somewhat successful since its recent introduction. Those who shall not be named on AAM were forced to include their company name on all their exhibition advertising on the back of this legislation last year, something which they had refused to do prior to this time. The Financial Services ombudsman has also recently ruled against two companies offering financial advice to those investing overseas, unfortunately he was only able to act because the two entities were also financial advisors. If they were not he would have no authority over them.

If those companies operating in the Irish market were seen to be regulated properly there would be less incentive for people to go to unregulated companies abroad to conduct their overseas business, it would be a very good USP for Irish companies. We cannot govern the world, but looking after our own patch properly would be a good start. Look what has happened with the smoking ban, others have followed where Ireland has led.

Why should the overseas property market be regulated when the domestic property market is largely 'wild west' territory?
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Indeed. It would appear there is some work to be done right across the property spectrum, this shouldn't be taken as a reason to not try to do something in the overseas arena. As we are not active on the domestic front I'm afraid we'll have to leave lobbying on this particular issue to those with the knowledge and incentive to do so. Hopefully someone will rise to the challenge.
 
The directors of OverseasCafe are three former directors of overseas property companies in Ireland, all of whom have significant agency experience in the market and who are all still involved in the overseas property industry, but not at the sales end. They are MD Eilís FitzGerald and fellow directors Diarmaid Condon and Raymond Norton. None of the three have backgrounds in the financial services sector.

Is Raymond Norton the same guy that owns Larionovo? [broken link removed]

If so, he would be very much involved in foreign sales!
 
It is not possible to regulate this Industry, in the same manner you could not regulate persons spending habits. Look how much have we all heard about Drugs - it doesn't stop people buying them. The unfortunate thing is that the good in the property business all become tarnished. As for Agents - just remember, these are people who are selling something they don't even own and working on commission. The more that is splashed out the more they earn. I am in the property business and hate agents -- with a passion.
 
mercman said:
I am in the property business and hate agents -- with a passion.
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A little intense, this hatred?

Just curious, what do you do in the property industry?

There's certainly a lot of estate agents with morality issues, but this is not dissimilar to the general population.
 
Not meant to be intense. It is one of those things which bother me when one is trying to run a business and come across those who are unsrcupulous. I could write a book on the happenings of my mistrust. I am in the property business as a commercial developer and Investor.
 
A former Minister for Justice gave a speech at the opening of a property Expo in Dublin where he made the point that the Irish government could hardly be expected to legislate for Irish investors taking capital to other markets. I can see the reasoning behind that. It is the job of everyone involved in the industry to promote and sign up for self regulation as it would help with public perception.
 
Rosinsky said:
The directors of OverseasCafe are three former directors of overseas property companies in Ireland, all of whom have significant agency experience in the market and who are all still involved in the overseas property industry, but not at the sales end. They are MD Eilís FitzGerald and fellow directors Diarmaid Condon and Raymond Norton. None of the three have backgrounds in the financial services sector.

Is Raymond Norton the same guy that owns Larionovo? [broken link removed]

If so, he would be very much involved in foreign sales!
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Yes Rosinksy, it is the same guy. He's not a director of Larionovo anymore. They've obviously not updated the site to reflect this fact.
 
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