Sale of NSW land registry another dumb privatisation

By Leith van Onselen

In late 2014, the Productivity Commission’s (PC) released a report on the provision of public infrastructure, which explicitly warned that the Coalition’s financial incentives to the states to sell-off public assets (“asset recycling”) “could act to encourage privatisation in circumstances that are not fully justified and encourage the selection of new projects that do not have demonstrable net benefits”.

Since that time, we have witnessed the states flog-off essential infrastructure and other public assets without giving due regard to longer-term consequences, and without ensuring that adequate regulatory frameworks are put in place first.

This procession of dubious asset sales recently led to ACCC head and longtime supporter of privatisation, Rod Sims, to call for a moratorium on further privatisations because of the damage that it is doing to consumers and the economy:

“I’ve been a very strong advocate of privatisation for probably 30 years. I believe it enhances economic efficiency [but] I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales, and I think it’s severely damaging our economy…

“It is increasing prices – let’s call it out… I want them to stop and think about the fact that when they’re privatising these things without effective regulation you are going to have increases in prices, and just think about the effects of that on the economy.

Stop and think. And don’t be surprised that your electorates think that privatisations increase prices. Of course they shouldn’t [increase prices] but the history tells you differently”.

Now, we have yet another example of a short-sighted and deleterious privatisation, with the Baird Government passing a bill to sell-off the nation’s largest land titles registry. From The Guardian:

The New South Wales parliament has just passed the land and property information NSW (authorised transaction) bill and the process of selecting new operators for the registry is now under way. The last vote needed to get it across the line came from Christian Democratic MLC Reverend Fred Nile…

The land registry is crucial for the security of property ownership. It guarantees the title to everyone’s land, looks after the integrity of land data across the state, supports the mapping and valuation arms of the Land and Property Information service and returns an annual profit to the government of around $50m. However, it is expected that the sale price could be $700m-plus, which would consist of a one-off payment and an agreed return to Treasury subject to contract which would run for 35 years…

Margaret Hole, a former president of the NSW Law Society, has raised several important issues with the sale, namely:

  • The land registry is a natural monopoly and critical infrastructure upon which the security of business and commerce are based.
  • There has been no independent assessment of the sale, and whether the expected sale price ($700 million) is suitable compensation for forgoing $50 million in annual revenue.
  • The successful operator is likely to require home buyers to pay title insurance, as occurs in the US, and thereby gouge users. Title insurance on the purchase of a $1.4m property is currently about $990. Last year 213,000 land transfers were lodged in NSW, which means that conservatively $210 million in insurance premiums can be raised by the operators holding the concession, or tens-of-billions of dollars over the 35-year term of the lease.
  • NSW home buyers will bear the cost of this impost.
  • Similar privatisation proposals have been rejected in a number of other jurisdictions around the world.

The Public Service Association has also slammed the sale, noting:

  • The State Government currently guarantees that the registered owners recorded in the NSW land titles system are the true owners of their land.
  • The State Guarantee is backed by Torrens Assurance Fund and provides compensation for any loss suffered as a result of fraud or error in registration.
  • If the service is privatised, the guarantee is lost and disputes over ownership of land or fraud are in the hands of a private company.
  • Currently, the State Government Torrens Assurance Fund circumvents the need for land owners to self-insure and contributes to containing costs of land transactions within NSW. At the moment, this is a once-only payment that covers your interests in a property for the life of your ownership.
  • If the State Government no longer guarantees titles, consumers may need to take out title insurance, in addition to their home and contents insurance, every year.
  • This could mean a hike in price for all of us, or a fall in standards because of cost-cutting measures.

The first rule of any asset privatisation should be that it boosts competition within the relevant market, and at a minimum does not lessen competition. But as Rod Sims has noted, most recent privatisations have broken this golden rule, placing achieving a heavy sale price (or fees) above the interests of users.

Enough’s enough.

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Comments

  1. Rusty PennyMEMBER

    “Enough’s enough”

    Well in the most sternly worded blog article or email sure…

    but then what?

    Its almost as if this act of selling off a tax farm to mates is as an of a government showing signs of acute tyranny.

    What did the Americans put in place for citizens to deal with tyranny again?

  2. “The land registry is crucial for the security of property ownership. It guarantees the title to everyone’s land, looks after the integrity of land data across the state,”
    Really Mike?
    1. What is preventing an unapproved foreign national from illegally registering the title of an existing NSW dwelling in their own name?
    2. How many NSW dwellings are owned by foreign nationals?

      • Yep,

        The Titles Office is not in charge of the transaction.
        If a person shows up with the correct paperwork and enough identification they can have the title transferred into their name.
        It is only guaranteeing the integrity of the title, not the name on the title.
        If the person was required to provide evidence that they could legally purchase the land/unit then the Titles Office would police it.

        The problem is with the system as a whole, not the Titles Office.
        I’d like to see the Titles Office enforce what you are suggesting, but they can only do what they are legally mandated to do.

        FIRB and others are where you should be directing your justified outrage.

      • A “guarantee” carries legal consequences
        The titles office charges a hefty fee for this “guarantee of integrity of title”
        The liability is real and large

      • What do you think they are guaranteeing?
        They do not guarantee the validity of the purchaser, only the the parcel of land that the title represents.

        You are attempting to attach responsibility for a problem where it does not sit.
        The Titles Office assumes that due diligence in regard to the purchaser has been done prior to transferring the title.
        If the purchaser needed to show up with passport and FIRB approval should they not be a citizen or hold a relevant visa, then your point stands.
        To my understanding, this is not currently the case.

        Again, I’m not saying that the system isn’t shot.
        All I’m saying is that, given the current rules, what you’re saying isn’t correct.

        If there are any NSW based conveyancers, or someone with similar knowledge, can chime in to clarify this it would be appreciated.

        Again, I’m not saying that the system isn’t shot.
        All I’m saying is that, given the current rules, what you’re saying isn’t correct.

      • Are you in IT, Patrician ?

        If so, this might make sense: the Land Registry is performing Authentication, but not Authorisation.

      • It is the Land Titles Office job to ensure the integrity of the land title system.
        The land title system has been corrupted with thousands of illegally obtained titles over many years.
        The Land Titles Office has not done its job.

  3. naturaltrustMEMBER

    There is no doubt that this is a monopoly business and must therefore remain in public hands. Unfortunately this is a flaw > in our government system whereby selling public assets makes deficits look positive and then the (usually Libs) party in government says ” Aren’t we good we have a surplus” .

    • naturaltrustMEMBER

      To confirm what I said above the ABC today reported:

      NSW Government debt free, but only due to housing boom, asset sales: Opposition

      By state political reporter Sarah Gerathy

      New South Wales is debt free, the Government has said, but the Opposition has questioned its budget priorities.

      New Total State Sector Accounts figures show the final surplus for the 2015-16 financial year was $4.7 billion – more than $1 billion larger than predicted in the June budget.

      General government sector net debt fell from $5.5 billion at June 30, 2015 to negative $57 million at June 30, 2016, meaning NSW is in a cash positive position for the first time on record.

      Treasurer Gladys Berejiklian said the situation demonstrated excellent economic management.

      • naturaltrustMEMBER

        It naturally flows from the above statements by Treasurer Gladys that if the government sells off everything they are the best economic managers ever.

        Ultimately, the best economic managers will sell Australia and we can all be happy.

  4. CornflakesMEMBER

    This is pretty close to Tax Farming. It is not like you can break the monopoly when there is supposed to be a single point of “truth” in the Torrens system (otherwise we revert to the crazy paper trail titles of yesteryear).

  5. That natural monopoly myth is being trotted out again and again.

    Theres no such thing. It only lives in the minds of people who want the government to run every industry, pretty much every commenter on MB.

    • Jono,
      Is your absolute ignorance feigned or do you sincerely believe that there can be no such thing as a natural monopoly?

    • I think there is only one land registry office?
      My issue is if this is privatised, it will become yet another Sydney Airport.

    • Are you denying that it’s not “natural” or that it’s not a “monopoly”? If it’s the latter, then that’s patently false – if the former, it might be the case but it’s still irrelevant, as it is a monopoly nonetheless.

      • A natural monopoly is said to occur when production technology, such as relatively high fixed costs, causes long-run average total costs to decline as output expands.

        Where is the proof that this is the case ? There are no examples of any industry where a natural monopoly exists. A natural monopoly is not one granted or created by government.

        Besides which, competition is a process, not an outcome or static state. So if monopoly pricing were actually to emerge, it shouldnt be a concern for regulators so long as competition is allowed and barriers to entry are removed.

        Thomas Di Lorenzo explains it properly, if you have time:
        https://www.youtube.com/watch?v=gm8ZJx_t7Oo

      • So you know how to use Google. Good for you.

        Now explain to me how it is efficient (or desirable) to have competing land registries rather than a single (monopoly) land registry? It isn’t. That’s why it is a natural monopoly.

      • So if monopoly pricing were actually to emerge, it shouldnt be a concern for regulators so long as competition is allowed and barriers to entry are removed.

        Isn’t one of the defining features of a natural monopoly when the barriers to entry are inherent, and therefore can’t be “removed” ?

        The ultimate example probably being the legal code.

  6. SA labor govt had been selling everything it can to create a surplus. Then says it’s only nasty Libs who sell govt assets. Basically all Govts of any pursuasion do it when it suits them.

  7. truthisfashionable

    $700mil!! Far out, I was going to suggest that we get a kickstarter going. Then we can determine the amount of land titles held by foreigners, we can announce and report monthly the increase or decrease of land titles held by foreign owners. Conversations based on facts can then occur.

  8. Now it’s so easy for Australia to sell assets to chinese. Just sell the land registry, the title transfer will be so easy.

  9. truthisfashionable

    Also, $50mil per year in revenue from an asset assessed at $700mil is ~7% return p.a.

    How much interest would NSW gov pay if they took out a loan to finance whatever it is they need to sell this to pay for?

    But then the liberals are the ‘financially smart’ party, so they say…

    • FiftiesFibroShack

      Yeah, but there would be costs involved. Does anyone know how much net income it produces?

      Also the government must consider what the benefit of it being a public asset is. If the LNP is arguing it will pull less resources from the public as a private entity then they’re going to have to release the numbers and let it stand up to scrutiny.

      At first look it seems another sale based on nothing but a tired and cretinous ideology.

      • I think this is all part of the deep corruption of our politics. I imagine there are some sweet post politics jobs lined up as a thank you for all these sales.

  10. Just another dumb decision by a Government intent on selling anything that isn’t bolted down to keep asset prices rising.

    My Tafe teacher reckons they are trying to set up his department for failure so they can shit can the whole thing, sell of the land to developers and build more apartments. It’s in Kogarah lol… So no doubt he’s correct.

    Sad to see, the teacher they replaced him with is a nice enough bloke, but doesn’t really provide any direction on the work we do. Makes me feel like quitting the course and going to a private institution doing the same thing. Which I think is precisely what the higher up’s want…

    • billygoatMEMBER

      @Gavin Yes this has been my take on education. Run it into the ground, privatise training to bullshit organisations & flog the land. It’s happening to high schools all over Australia: Hollywood Highschool in Perth, Vaucluse High in Sydney and in Ballarat Victoria a few high schools closed down several years ago, students consolidated and a company called ‘Phoenix’ building massive campus on western wasteland outskirts of the Rat. All building s on old site now demolished except for one ‘heritage’ category and land cleared for retirement villa. Then there is Rottnest in Perth being run into the ground, minimal upkeep, overpriced holiday shacks & complicated booking system so utility under utilised & rundown building a case that better to sell to developers meanwhile robbing everyone the opportunity to enjoy amenity paid for by taxpayers for years. Same thing at Callum Park in Sydney: Corruption, Nepotism & Cronyism amongst governments& developers.i love a sunburnt country!

  11. naturaltrustMEMBER

    It naturally flows from the above statements by Treasurer Gladys that if the government sells off everything they are the best economic managers ever.

    Ultimately, the best economic managers will sell Australia and we can all be happy.

  12. As a current executive of LPI I can say with some authority that both Margaret Hole and the PSA are making erroneous claims.

    Leith, I would direct you to the second reading speech of the bill for some correct information:
    https://www.parliament.nsw.gov.au/bills/DBAssets/bills/SecondReadSpeechLC/3330/2R%20Land%20and%20Property_1.pdf

    “The Government will continue to guarantee the Torrens titling system backed by the Torrens Assurance Fund. All applications for compensation from the Torrens Assurance Fund will continue to be made to the Registrar General. This will ensure the continued strong backing of the Torrens system by the State’s guarantee of title.”

    • In English please, Baxter.
      You know I don’t speak Spanish.

      If only I was allowed to post an Arrested Development GOB gif right now.

      MONEY!

      • From the legislation:
        http://www.legislation.nsw.gov.au/#/view/act/2016/46/part4/sec16
        s.16(1) The authorised concession arrangements may include provision (a penalty provision) that requires the authorised operator to pay a penalty for a failure by the authorised operator to comply with an obligation under the authorised concession arrangements.

        From the 2nd reading speech:
        “The Registrar General will be a public sector employee. The bill introduces new provisions to allow the Registrar General to monitor and enforce the authorised operator’s performance in operating the titling and registry services. Performance will be monitored through clearly defined service levels, KPIs and obligations that ensure the security of the data.”