MPs to quiz Chinese on Aussie property purchases

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ScreenHunter_06 May. 06 09.27

By Leith van Onselen

From The Australian comes news that members of the Parliamentary into into foreign property investment will embark on a week long tour of China to help ascertain the degree of investment in Australian property:

The delegation is being led by committee chair, Kelly O’Dwyer, who is joined by fellow Liberals Peter Hendy and Scott Buchholz and Labor’s Pat Conroy…

This is not the reason for the trip but the MPs will have the chance to get China’s perspective about the sensitive foreign investment issues…

And on the question of Chinese investment in housing, [O’Dwyer] said the trip would provide the ­opportunity to ask relevant questions to Chinese banks…

“I’m interested in exploring what happens in China. For example, are non-resident foreign investors able to purchase property in China?”.

This is interesting news that will hopefully add to pressures to tighten requirements on foreign investment, or at least ensure greater monitoring, transparency and enforcement of the rules.

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Recent reports from the Australian Bureau of Statistics, real estate agents, industry professionals, and UBS investment bank, have shown that the official Foreign Investment Review Board (FIRB) data on foreign property investment is inaccurate, and debunked the notion that foreign purchasers of Australian property are an insignificant share of demand and are not working to price locals out of the market.

According to the latest NAB property survey, foreigners accounted for nearly 10% of demand for pre-existing dwellings in Australia (see next chart).

ScreenHunter_3517 Jul. 29 14.27
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In a similar vein, the latest ANZ quarterly property survey showed that around 14% of total housing sales were to foreigners; although it didn’t differentiate between investment in existing or new homes (see next chart).

ScreenHunter_3518 Jul. 29 14.28

When combined with the fact that FIRB has, since 2010, failed to prosecute any foreign buyer for breaching the foreign ownership rules, and the admission by FIRB that it is incapable of monitoring/enforcing whether a foreign temporary resident has sold their home within three months of departing Australia, then there can be no doubt that the regulatory regime governing foreign investment in property is broken and fundamental reform is desperately required in order to restore faith and integrity to the system.

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As I keep saying, young Australians have a right to expect the government to implement measures to make housing more accessible by increasing supply, as well as clamping down on excess demand, whether from foreigners or local tax-advantaged speculators.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.