New Zealand fraud squad investigates real estate agent scam

Oct 10, 2007, 23:45 GMT

Wellington - New Zealand's Serious Fraud Office is investigating a multi-million dollar scam after five real estate agents were suspended for allegedly inflating the sales prices of properties to raise development funds from banks, news reports said on Thursday.

Barfoot and Thompson, the biggest real estate firm in Auckland, New Zealand's largest city, said it had terminated the contracts of three agents, and it was believed up to 25 people throughout the industry may have been involved.

The Real Estate Institute of New Zealand (REINZ) said five agents had been suspended pending a full investigation into claims that they had inflated sales prices in order to raise bigger mortgages than banks would normally have lent on the properties.

Barfoot and Thompson director Peter Thompson told the Dominion Post that some properties were sold several times, with prices inflated by several thousand dollars each time to make it appear they were worth much more than they actually were.

Thompson said the complex scam involved raising money for developing the properties without those involved having to produce any money of their own.

It relied on them being able to resell the developed properties quickly for a profit each time and repay the inflated mortgages.

Government minister Clayton Cosgrove, who is drafting a new law to govern the real estate industry, told Radio New Zealand it was in dire need of reform.

He said the law would take control of the industry away from the REINZ and put it in the hands of independent regulators.