John McGrath from McGrath Real Estate has hit back at claims made yesterday by buyers’ agent, David Morrell, that “real estate agents and property lawyers are willingly helping foreign investors to illegally buy prestige homes in Melbourne and Sydney” and that this was “causing a domino effect” in the local market and helping to price-out locals. From The AFR:
Prominent Sydney estate agent John McGrath says he hasn’t seen Asian buyers rorting foreign investment rules to buy blue-chip real estate.
“I am not aware of any such practices,” said the founder and chief executive of McGrath Real Estate Agents.
“Chinese buyers who purchase through our agents always do so through legitimate methods.”
“We have extended discussions with most of our clients, so we are always aware whether they are buying real estate subject to Foreign Investment Review Board approval or if they have existing residency”…
Mr McGrath said he strongly disagreed that Asian buyers paid a premium for property…
McGrath’s claims that Chinese buyers always “do so through legitimate methods” is questionable. Earlier this year, McGrath agent, Michael Coombs, admitted that “of the eight sales he made to Chinese buyers in [Mosman in] the past six months, three were to visa holders and five were purchased in the names of a family member”.
More broadly, John McGrath has also previously described Chinese demand for Sydney property as “unprecedented” with “as much as 80 per cent of homes in parts of Sydney… being sold to Chinese buyers”, suggesting that premiums are being paid.
To further test McGrath’s claims that homes were not being bought illegally, I searched the listings on one site, sydneyluxuryproperty.com (previously inaccessible to Australian IP addresses), which revealed a bunch of pre-existing homes being marketed to foreigners. Below is a small sample of the homes on offer, or which have recently sold:
The FIRB rules allow foreign non-residents to purchase off-the-plan housing, in a bid to boost supply, but precludes them from purchasing established homes. By contrast, temporary residents are allowed to purchase established homes, but are required to sell them within three months of leaving Australia. However, as noted previously, since 2010, FIRB has failed to prosecute any foreign buyer for breaching the foreign ownership rules. FIRB has also admitted that it is incapable of monitoring/enforcing whether a foreign temporary resident has sold their home within three months of departing Australia.
Clearly, none of the above homes marketed on sydneyluxuryproperty.com are newly constructed dwellings (the first two are more than 100 years old!). So how exactly are such sales permitted and why aren’t they being enforced by FIRB?
As Labor MP, Kelvin Thomson, has previously noted:
“FIRB is naive, under-resourced and doesn’t actually regard it as its mission to maintain Australian ownership of Australian real estate… Young Australians who can’t afford to buy houses are the silent victims of its neglect and indifference”.
Spot on. 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.
This includes adequate enforcement of the rules in place to prevent foreigners from purchasing pre-existing homes, as well as ensuring that homes purchased by temporary residents are sold upon exiting Australia.
As it stands, the foreign ownership requirements in Australia are nothing more than window dressing, and are not being adequately monitored or enforced by FIRB. The integrity and confidence in the system is being undermined, in turn breeding opposition and cynicism towards foreigners.
Real estate agents, lawyers, and the like also appear to be complicit in assisting foreigners to flout the rules, which is why all buyers of pre-existing housing in Australia should be required to provide proof of citizenship/residency, with real estate agents also required to highlight the FIRB rules at the point-of-sale and conveyancers required to check-off and report any breaches at settlement.
