THE number of investors caught up in failed property investment companies will keep rising. Lawyers believe, the collapse of Australian Capital Reserve may not be last.
So far, 2,000 investors lost approximately $400 million in Westpoint followed by 4,000 investors with $290 million in Fincorp.
And this week, 7,000 investors lost $330 million in ACR and the Estate Property Group.
Slater & Gordon lawyer Ben Whitwell said the increasing number of investors involved in each case is alarming.
He said the higher number of investors in each corporate collapse could be due to the Federal Government’s changes in the superannuation laws.
“The relaxing of superannuation laws has enabled mums and dads and retirees to move their nest egg away from traditional super funds and into these schemes.
“Also these investors believe property is a safe investment so they pool their savings in the schemes. What they don’t realise is that they are not directly investing in property rather in the property developers,” he added.
According to the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority, financial assets held by retail investors totaled $2.14 billion in December 2006 – up from $1.25 billion in December 2001.
Not surprisingly, the greatest growth was in self managed superannuation funds, where it jumped to $894 million in December 2006 from $518 million in 2001.
Whitwell said he hopes the ACR collapse will be last.
“But that may not be the case. We have a setup unit within Slater & Gordon to monitor dubious investments in the marketplace, which if they collapse could be in the magnitude of Westpoint, Fincorp and ACR.
“It could happen in the next six months, it could happen in the next year.” Whitwell concluded.
Yesterday, the Australian Securities and Investments Commission’s newly appointed chairman Tony D’Aloisoi told a Senate Committee, that it will form a new property investment watchdog team to try and prevent another corporate collapse.
The new team would review over $8 billion of the $520 billion of the retail property investment market over the six to 12 months.
“We have identified that three stage plan going forward in that sector as urgent work, based on an assessment what has gone and where the problem areas have been.
“We really feel that we have got to bring in additional expertise to help us assess these underlying business models, how they work, whether they have inherent flaws in them, and work with the trustee and issuers to see what we can do to in relation to both the existing ones, and just as importantly, in relation to new issues,” D’Aloisoi said.
Australian Property Journal
