Australia: An attractive proposition?
Investing in Australia is an attractive proposition with steadily rising property prices despite the global financial crisis (GFC). However, this has been accompanied by a number of identity fraud schemes operating across Australia soaring. Most recently, a $150 million mortgage fraud scam was uncovered.
In the economic outlook for Australia released by the Organisation for Economic Co-Operation and Development (OECD), it was reported that Australia has been less affected by the GFC than most other OECD countries and is likely to experience a relatively robust recovery.
With business and consumer confidence at healthy levels, there has been an unprecedented surge in housing finance. This has been driven in part by strong population growth, pent-up demand for housing stock and lower interest rates than previous years. Property prices have held firm, with Australia largely failing to experience a drop in property prices that has been the case in other parts of the world.
According to ANZ Bank's Property Outlook Report, property prices across Australia rose by an average of 10% in 2009-2010, with the prediction being made that as construction levels have been low and there has been a surge in population growth, property prices will continue to be driven up, particularly in the residential market.
A recent report, Housing Outlook for 2010-2012, released by QBE Lender's Mortgage Insurance and prepared in conjunction with BIS Shrapnel, speculated that property prices across Australia will grow by as much as 23% over the next 3 years.
So why is mortgage fraud on the rise? Australia's longest serving fraud investigator, Detective Superintendent Colin Dyson of the New South Wales Fraud Squad, spoke at the National Identity Crime Symposium in October 2009. Given the dramatic rise in property prices over the last ten years, in a report of what was said at the Symposium, Det Supt Dyson opined that organised crime groups have realised that mortgage fraud is becoming increasingly lucrative as they can acquire significant sums of money by fraudulently taking out loans against high value properties. As property prices continue to rise, the rewards are increasingly outweighing the risks. The property system in Australia is not infallible and, given the potential sums involved, it appears that there are many different players in the conveyancing chain, from real estate agents and mortgage brokers to bank staff and lawyers, who seem prepared to step outside the law to obtain money by deception. In addition, the sanctions for mortgage fraud are generally less severe than for other crimes.
The $150 million scam is reported to involve more than 200 residential and commercial properties with over 250 people wanted for questioning by police and several arrests already having been made. The scam apparently involved identity theft with properties being mortgaged without the owners' knowledge, as well as property prices being fraudulently inflated. It is understood that Australia's four largest banks, as well as a number of smaller lenders, have all been hit by the scam. It has been reported that at least two murders are linked to the scam, including the murder of a prominent Sydney businessman who was gunned down outside his home.
The police have urged lenders and property owners to protect themselves against mortgage fraud. With First Title on the front line in the battle against such fraud, having been involved in a number of leading cases on mortgage fraud in recent times, we have been working with the police, Mortgage and Conveyancing Industries to help prevent fraud through increased awareness and through offering tailored solutions providing insurance coverage to lenders and purchasers.
Jon Downes, General Manager, First Title Australia