What better way than to attempt to shut down action on foreign ownership of residential property than to label any crackdown as “racist”. And yet, this is exactly what one of the key beneficiaries of illegal property sales – Chinese-language real estate website, Juwai – has done. From The Age:
“Yes I think the targeting of Chinese buyers is racist and it threatens to harm the attractiveness of Australia as an offshore investment destination,” Juwai co-chief executive Simon Henry said…
“Proposed law reforms in the mix at the moment have been put out in response to sensationalist headlines about Chinese buyers pushing up prices without the data to support them,” Mr Henry said. Juwai.com is an Australian-owned business that operates in China, advertising property in 60 countries.
Meanwhile, Ray White Real Estate chairman, Brian White, claims he has not seen “any evidence of endemic levels of illegal foreign buying and noted his concern that many anecdotal stories are based on “sloppy” sources that often wrongly confused Australians of Asian descent with foreigners”...
Rather than playing the race card, Henry needs to explain why adding transparency to the foreign investment regime and adequately enforcing the rules governing foreign investment into Australian property is undesirable? If he and White are so convinced that foreign investment into established dwellings is a non issue, then they have nothing to fear from FIRB’s crackdown.
Henry’s claim that action is not required because of lack of data is also circular. The parliamentary inquiry into foreign ownership, chaired by Liberal MP Kelly O’Dwyer, was absolute in its view that it is the lack of data that has made enforcement near impossible:
“I regard the current internal processes at the Treasury and FIRB as a systems failure. Most concerning is that sanctions seem to be virtually non-existent. There have been no prosecutions since 2006 and no divestment orders since 2007. Suggestions by officials, that this is due to complete compliance with the rules is simply not credible. The data on foreign purchases of Australian houses and apartments is inadequate, making policy evaluations very difficult”…
FIRB earlier this week also backed-up this view.
Accordingly, central to the inquiry’s recommendations was the establishment of a national register/database of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate, along with an alert system for the expiry of temporary visas to ensure homes are divested. Again, only someone with a vested interest in boosting foreign property sales would view greater transparency as a problem.
Besides, the data that is available, albeit incomplete, does show that an estimated 9% of all sales of existing homes have gone to foreigners and higher in the big capitals (see below NAB chart). This obviously has placed upward pressure on house prices and made it much more difficult for young Australians to purchase a home of their own.
More broadly, the crackdown and proposed strengthening of the foreign investment surveillance/enforcement regime is also excellent economic policy, since it will help to lower house price pressures, reduce financial stability risks, and enable the RBA to cut rates further than would otherwise be the case, placing much needed downward pressure on the currency.
