Hans Hendrischke, Professor of Chinese Business and Management at the University of Sydney, has produced some laughable “research” today in a bid to prove that Chinese nationals account for just 2% of Australian property sales, therefore, they are not helping to push up home prices. From Domain (my emphasis):
Hans Hendrischke compared the value of all residential property sales against Foreign Investment Review Board (FIRB) statistics, to calculate the impact of Chinese buyers – Australia’s largest source of foreign investment – on local housing markets…
Using data from the Australian Bureau of Statistics and CoreLogic RP Data, he estimated that $270 billion of residential real estate sold nationally in 2014.
Compared to FIRB approvals, which covers both new and established housing, he estimated Chinese purchases totalled “around the 2 per cent mark”…
Yet he argued even this figure was “overstated” as the figures were approvals and not actual purchases.
“Don’t blame the Chinese,” was Dr Hendrischke’s conclusion after presenting his findings at the Festival of Urbanism at the University of Sydney on Wednesday.
The research did not take into account the potential impact of illegal purchases by foreigners, which the Federal Government is presently investigating.
You would think that someone with a PhD would look at the veracity of the FIRB data before undertaking such an analysis and coming up with such a strong conclusion.
Blind Freddy knows that the FIRB data is highly spurious, since it only accounts for approvals, not actual sales. Kelly O’Dwyer MP, who chaired the recent parliamentary inquiry into foreign ownership, acknowledged that the FIRB data was inadequate on release of the inquiry’s report (my emphasis):
“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 chairman, Brian Wilson, also noted the inadequacy of the foreign investor data when he appeared before the Australian Securities and Investment Commission’s annual conference in March:
“There are about 11 million residential dwellings in Australia, and about 600,000 property transfers every year. It is inevitable some of those properties will be exchanged contrary to the law, but our ability to first discover and then prosecute these cases is sorely limited”…
“At the moment the FIRB and Treasury can only investigate the cases that come before us. What is needed is central depository of automated data to aid detection”…
The only data that is publicly available comes from the NAB quarterly property survey of 300 real estate professionals, which notes that foreign buyers (mostly Chinese) are very active in the housing market, particularly in Victoria (Melbourne) and New South Wales (Sydney):
While it is wrong to pin the blame for Australia’s sky high housing costs solely on the Chinese, given that multiple factors are at play (e.g. tax concessions, supply-side constraints, high immigration, etc), it is also highly disingenuous to use dodgy data to obscure the issue of foreign buyers purchasing established housing, and thus exacerbating Australia’s housing affordability problems.
