Understanding foreign property purchases

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By Leith van Onselen

In the comments threads of my recent articles there has been some discussion on the extent of foreign property purchases of Australian real estate, as well as claims and counter-claims about what foreigners are allowed and not allowed to do when it comes to buying Australian housing.

I thought it was time that the rules relating to foreign property purchases were articulated in order to inform discussion and correct some common mis-conceptions. Below is my understanding of the rules.

First, it is important to note that the rules have changed considerably in recent years. Australia relaxed the approvals required for foreign ownership to help stimulate home prices in the wake of the GFC only to then reintroduce stricter controls in 2010.

As they now stand, the rules encourage foreign investment in new dwellings, thereby increasing the supply of new homes. However, they make it more difficult for foreigners to acquire established properties, in order to prevent foreign investment from simply driving up prices of the pre-existing housing stock.

Foreigners that are not residents of Australia are permitted to:

  • Purchase residential properties under development (i.e. “buying off the plan”), or new construction that has not yet been sold. There’s no limit on the number of properties an investor can acquire, provided the developer has pre-approval to sell to overseas investors.
  • Purchase vacant land for development, provided construction commences within 2 years.
  • Purchase an established home for redevelopment purposes. (You can’t rent out the existing home, but you can rent out new construction after the previous dwelling has been demolished.)
  • Purchase already developed, non-residential, commercial real estate – though restrictions apply to rural land.

In addition, foreigners who are temporary residents in Australia can:

  • Purchase an established (previously occupied) residential property, but only if you live in it. You can’t purchase an established home with the intention of renting it out, and the property must be sold when you leave Australia. (This restriction obviously disappears if you become a Permanent Resident.)

Finally, a foreign company with business in Australia can:

  • Purchase a home for its temporary resident employees, provided the property is sold or rented if it remains vacant for 6 months or more.

Most property acquisitions require pre-approval by the Foreign Investment Review Board (FIRB). In a nutshell, this applies to the purchase of:

  • Established homes (which, remember, can’t be used for investment purposes).
  • Commercial property above certain thresholds.
  • Residential real estate or vacant land for redevelopment purposes.

In assessing applications, FIRB applies a “national interest” test. Most applications that meet the criteria are approved within 30 days, unless the applicant is government-owned or controlled or the site is considered high profile. Investors must apply for a specific property – FIRB does not grant general or “in principle” approval. Further, any contracts for sale must state “subject to FIRB approval.”

That’s as much as I know. Feel free to correct any errors or add any omissions in the comments section below.

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Leith van Onselen
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Comments

  1. GunnamattaMEMBER

    OK, great run through of the policy position – all square as I see it.

    The reservation I (amongst many others) have is about the process, and the monitoring of the process.

    Next – go to this site

    http://www.firb.gov.au/content/default.asp

    Middle left of the screen you will see ‘Residential real estate apply online’

    Then next page you give them an email and password and log in – or use the first time log in.

    First time log in takes you to a page with the below on it

    Exemptions

    If you answer ‘Yes’ to any of the following questions, you are exempt from the requirement to notify under the Foreign Acquisitions and Takeovers Act 1975 you do NOT need to submit an application:

    You are an Australian or New Zealand citizen – even if you are currently living in another country. Yes No

    Your spouse (married or de facto) is an Australian citizen and the property is being purchased in both names as joint tenants. Yes No

    You are an Australian permanent resident. Yes No

    You inherited the property. Yes No

    You obtained the property through a court order (for example, a divorce settlement) under Australian law. Yes No

    You are purchasing the property from a Government body (Commonwealth, State or Territory or Local). Yes No

    You are buying the property from a developer with prior advance off the plan approval to sell the properties for foreign persons. Yes No

    Then next page after clicking no to allthe above brings you to a page with

    About this application

    Are you submitting this application as: An Individual purchaser, purchasing on your own or with other individuals?
    An Australian agent acting for one or more individuals?
    A representative of a company?
    A representative of a trust?

    Is there a signed contract for the purchase of the property?
    Yes
    No

    then the next page comes

    Type of property

    Select the type of property that you are purchasing:
    A new house or unit that you are buying from the developer.
    Select this option if you are buying a dwelling where the construction is complete or if you are buying off the plan. The dwelling must not have been sold before. In most cases, nobody will have lived in the dwelling. You can still select this option if the developer has rented the property out and it has been lived in for less than 12 months.

    An established (second hand) dwelling that you intend to live in.
    An established or second hand dwelling is one that has been lived in and sold before. You are only eligible to make this kind of purchase if you are in Australia and hold a temporary visa that was granted for a period of at least 12 months. We will consider your application if you currently hold a bridging visa. You are only allowed to purchase this kind of property to live in – you cannot rent it out to others

    An established (second hand) dwelling to be demolished and replaced with new dwellings
    You will only be considered eligible to make this kind of purchase if the end result will be more dwellings than there were before. For example, if you are knocking down a house and building 2 townhouses on the same block of land or if you are replacing a derelict dwelling with a habitable dwelling. There must be currently a residential dwelling on the land and this dwelling must be demolished – not renovated or refurbished.

    Vacant land on which you plan to build a single dwelling.
    Select this option if you are buying a single block of land on which you intend to build a house. This includes if you are buying a house and land package. You must be able to start construction of the house within 24 months of making the purchase.

    Vacant land on which you plan to build multiple dwellings.
    Select this option if you are buying undeveloped land on which to build multiple dwellings. For example, if you are building a block of flats, a complex of townhouses or subdividing the land and building multiple houses. You must be able to start construction within 24 months of making the purchase and the amount you are planning to spend on construction must be at least half the cost of the land.

    Then you end up on a page where you need to log in and provide some more details

    The concerns about the process revolve around an approval which is given more times than not – indeed more than 99% of times as has been pointed out elsewhere.

    There is no indication anywhere about the extent of verifying of any facts put into the click and go section of the site.

    There is no indication of any follow up.

    I have had a chat with RE agents and buyers who have told me they simply put in the ticks in boxes that they know will give them the outcome they want, and nobody looks.

    Look at the process and the monitoring. The policy, ostensibly, is fine.

    • So megabank foreclosures on agricultural enterprises are waved through perhaps?

      Unless it a big enough deal to be reported in MSM.

      Cubbie gets reviewed but Connemarra does not?

    • GunnamattaMEMBER

      OK further to that – I have just gone through and done it

      You fill in a page with a nationality and passport number……

      You fill in a visa detail and dates…..

      Then you fill in details and value of the address of the property you have ‘applied’ for….

      Then you get another tick and click with the below……

      Property Declarations

      Select either yes or no for each of the following:
      I/we understand that approval will only apply to the property specified in this application and that I/we must seek separate foreign investment approval for any other acquisitions of residential property in Australia. Yes No

      I am a /we are temporary resident(s) residing in Australia. Yes No

      The dwelling will be vacant at settlement. Yes No

      I/we will reside in the dwelling. Yes No

      I/we will not rent any part of the property. Yes No

      I/we will sell the property when we no longer reside there. This may be either because I/we leave Australia or because I/we move to another residence within Australia. Yes No

      I/we will notify the Foreign Investment Review Board in writing within 14 days when my/our visa expires or changes, when the dwelling ceases to be my/our principal place of residence or upon the sale of the dwelling. Yes No

      I/we undertake to provide any supporting documentation or information on eligibility for this purchase and how I/we have met the above conditions, if requested in writing by the Foreign Investment Review Board. Yes N

      Then you get a final page of tick and click with the below…….

      General Declarations
      By submitting this application, I/we declare that:
      1. I declare that all persons named as purchasers of the property are aware of the eligibility criteria and conditions set out in this form.
      Yes No *
      2. I understand that it is a criminal offence subject to prosecution and possible fines and/or imprisonment to provide false or misleading information as part of this application.
      Yes No *
      3. I and any other persons named as purchasers of the property in this application consent to The Treasury sharing information about this application with other government departments or agencies (for example, the Australian Federal Police or the Department of Immigration and Citizenship).

      Then your application has been successfully submitted.

      ……..I have just been told that to actually buy a property you only need to have submitted an application, not have had it approved (if anyone can confirm that or knows differently I stand happy to be corrected – indeed I genuinely hope that is incorrect)

      • GunnamattaMEMBER

        And ten minutes later you get an email saying the below

        Your application to purchase real estate in Australia was submitted successfully.

        You will generally receive a decision on your application within 30 days or earlier if you have indicated that you are purchasing the property at an auction or through tender within 30 days.

        The attached document is a record of the information you provided to us in your application. Please save a copy for your reference.

        • GunnamattaMEMBER

          OK Guys I have received an email back from FIRB and this absolutely sickens me……

          I applied on Thursday with a fake name (Chodley Wontok), a fake passport number, a made up visa number, and a fake address of an abode in Melbourne which I used to frequent (17 Highmont Drive Vermont South), and applying a made up transaction price…..

          2 working days after applying online

          Dear Mr Wontok

          I refer to correspondence received on 22 March 2013 concerning the proposal for Chodley Wontok (the applicant) to purchase residential real estate known as 1 17 Highmont Drive, Vermont South, VIC for $598,000.

          Under regulation 3(q) of the Foreign Acquisitions and Takeovers Act 1975 the acquisition of Australian urban land by a foreign person is exempt where the acquisition is of an interest in land that is zoned as residential property and the person:

          (i) is, at the time of acquisition, the holder of a permanent visa within the meaning of the Migration Act 1958; or

          Based on the information provided, the proposal is exempt as outlined above.

          If you are receiving this letter on behalf of the applicant, please provide a copy to the applicant.

          Regards

          Briony

          They have given approval.

          ………If this is all the scrutiny that FIRB apply to real estate purchases by foreigners in Australia there are major major problems, and nobody is looking at the volume or process whatsoever.

          No wonder buyers and agents think the system is a joke.

          • GunnamattaMEMBER

            Mate right at this moment I am wondering why nobody else has reported this.

            I could print off the email they have given me and show it to an agent. The agent will assume I am kosher. The buyer will assume I am kosher.

            It would only be if someone else were to look through my purchase and somehow appeal my buying the place (and realistically who would ever do that – is there a process?) that it would even be uncovered.

          • Absolutely incredible – even as a serious cynic i didn’t this it was this pathetic.

            nice work btw.

          • I take my hat off to you sir. Well played.

            I only now realise how absolutely stuffed we are in this country relying on crap like this in order to barely keep our economy going in the face of one of the biggest mining booms in history (all be it one coming towards an end).

            It just goes to show how the general public is shafted by elected officials, their public servant cronies who approve this crap and finally the media who covers it all up like there is nothing wrong.

            ACA/TT should be all over this reaming the government and the public service for making property so unaffordable in this country because of the foreigners. Making foreigners seem like the bad guys is their bread and butter yet they avoid it like the plague because it would show exactly how shaky the ground is underneath the Australia property market, how a trickle of doubt could potentially turn into a rout.

            Also +1 to The Householder.

            Let Chris Vedelago know about this and he will hopefully get it out to a wider audience.

            I am genuinely getting to the point where we need to start our own political party people, just call it the “Fair go” party. With policies for affordable housing, fiscal responsibility, urban planning changes etc all the usual MB issues.

          • Liu MianzhiMEMBER

            Great work – it’s not every day you uncover a $20billion regulatory black hole (annual foreign investment in residential real estate: page 27 of the 2012 FIRB annual report). If even 1% of transactions are dodgy it is a pretty big number.

            It looks like the answer is that:
            – on paper, the system isn’t bad and nor is the policy;
            – but it just isn’t being implemented in any meaningful sense.

            Ultimately, Wayne Swan is not doing his job or properly fulfilling his obligations under the law.

            Under the Act, the Treasurer is required to assess notifications, make determinations and enforce compliance.

            Obviously he can delegate the task, but he is responsible and the obligation is on him.

            (of course, Joe Hockey may do no better, but for now at least that is hypothetical)

          • GunnamattaMEMBER

            agree 100% chief.

            Basically the political system needs a system there (to tell punters concerned about foreign purchases that is being tightened etc or there is a crackdown) but also needs it to have no teeth (so the foreign purchasers dont feel they are in any way dissuaded.

            a $20 Billion black hole – thats what it is.

      • Liu MianzhiMEMBER

        Section 26A(2) of the Foreign Investments & Takeovers Act provides that if you fall within the notification requirements, it is an offence to enter a binding agreement to purchase the property before the sooner of:
        (a) 40 days after you lodge the application; or
        (b) the day you get written approval

        So I suppose that if you are not positively rejected within 40 days you are in the clear.

        In any event you can get around it by making the purchase conditional, so that the contract is not binding until a later date (brings you under the exception under s 26A(3)).

        In theory the Treasurer has the power under s 21A(3) to order the subsequent disposal of the land. Doubt it would ever happen though, except in the case of proven fraud.

    • F.ck me! Thanks for a great comment.

      What a joke – could these party politicians suck any more – they really don’t give two sh&ts about the punters.

      • nexus789MEMBER

        Hope you never thought they did. They are all about themselves, getting reelected, serving vested interests and foisting globalization on us all.

    • dumb_non_economist

      Gunna,

      Who’s checking even if you don’t do that, are the REs checking on a persons right of abode? I doubt it, does the Lands Dept check on who’s buying? I doubt it. It’s all bs.

  2. Take foreign investors out of the equation and the game would have been up long ago!
    .
    We have opened the doors to any cashed up foreigner to speculate on our housing market whereas the majority of citizens have been shafted!!!
    .
    Pulling the plug and letting this country sink would be no great loss. Im ashamed to have an Australian passport thats all I can say.

    • In case of Melbourne, if foreigners (generally assumed to be Chinese) are so cashed up and wanting our property, why is there double the stock on market cf three years ago?

      Regarding agricultural land or farms, I don’t recall anyone complaining about British etc. buying up over the years?

      Many farmers (inc cousins who have had farm on market for 1+ years now), even though having good recent season most have significant debts/overdrafts, would gladly sell to Chinese etc. but are only able to attract interest, not a sale.

    • Not if they build it, sit on it and dont rent it out…!!! Then its about as useful as a parachute without a ripcord.

        • No, because Australian capital isn’t seeking to be hidden from a communist government, it implies entirely different economic dynamics and thus is a market distortion to normal functioning domestic housing market – which is non-transferable, non tradeable commodity.

    • More foreign capital developing property means a greater supply of housing.

      Nonsense. It is simply more money competing for the same amount of property.

      • Developers would respond to more foreign capital entering the market. I know plenty of Chinese investors buying off the plan. This means more buildings are being constructed to satisfy their demand.

  3. Great post.This issue needs mainstream coverage.With elections around the corner will it make a difference to the pollies?

  4. THANKS very much for posting this and also to Gunnamatta (above) for clarification about the actual application process; I’ve always been suspicious it’s a system that isn’t really policed.

    To respond to the accusations that concerns about foreign investment equals xenophobia – it isn’t – it’s about the bubble market it seems to have created. We have to recognise that the market is subject to what appears to be a large amount of distortion at the moment due to the amount of foreign capital coming in to purchase residential assets. Part of the problem is that we simply don’t know what the real picture is because there isn’t public available data and the system isn’t really policed.

    As Peter Fraser said in a previous thread, this could actually be good for locals in the long term because if there’s a correction then the locals will win – but is there any advantage in concentrating people in high rise apartments in the inner city? I thought that’s why the Housing Commission stopped building high rise in the 60’s – because it’s an awful way to live.

    • The obvious advantage of concentrating people using high rise buildings is it makes public transport vastly more viable to build and operate.

      Having lived in high rise buildings in Hong Kong and Singapore I’d have to disagree with your assertion that it’s an awful way to live. Happily survived for years with no car. Try doing that while living in an outer suburban home in Australia.

    • It’s an article of faith to most Australians that living in high rise is an awful way to live. But it’s wrong. Living in an awful high rise is an awful way to live.

      • And lots of them are really awful, so I’m told. Not enough natural light, too much noise from the street below, crap fittings and fixtures, walls too thin (you can hear your neighbours going to the toilet) and above all – TOO SMALL. Give me a house with (at least) a small backyard any day.

    • Foreigners having a process to buy in Australia does not make a direct causal link between bubble and foreigners, merely a subjective (potential) causal link.

      Bank mortgage friend says runaway credit growth for some years = bubble.

      Like everything in RE complex, no one really knows what the true picture is, and as Buffet says, if you don’t understand don’t buy into it.

  5. One of the “loopholes that’s not a loophole” is the purchase to demolish option. Very popular in my area (Ryde, Sydney). If you think about it has a deleterious effect on FHBs as it puts a premium on properties which are liveable if not flash, eg older unrenovated properties. Although there’s a positive aspect (implicit investment in oz construction industry) the downside is that it’s not increasing land utilisation.

  6. I dont really understand the Foreigner land purchase phobia. I know many rich Chinese that would be interested in buying Australian RE. For them it is really just asset portfolio diversification coupled with a desire to park some assets outside the reach of the Chinese gov’t.

    Being a successful Chinese businessman is a little like playing high stakes poker where the rules of the game are changing as the hand is played. It is little wonder, to me, that they like to park a little money outside of the system.

    I cant really see their actions as speculation, I know that I have been asked, by Chinese friends, to buy Aussie properties, even when I advised them that the RE was overpriced and unlikely to generate a positive return, they still wanted to proceed.

    • I totally understand why rich Chinese would want to buy up in some stable, safe place like Australia too. But buying flats to leave empty as a long term investment vehicle while lots of Aussies can’t afford to enter the market is politically unpalatable to many.

      • If that’s your concern then you should be criticising the regulations that restrict supply not the origin of demand.

        • Again, it is definitely the origin of demand which is the concern, whether that origin was facilitated by the government or not, the outcome is a market distortion and the true cost is increased debt burden on domestic citizens via a reduction of available dwelling supply as it is entirely removed from the local supply by foreign hoarding.

          The true cost to Australians is a massive build up of debt via being excluded from new dwelling construction via capital from potentially criminal and corrupt, definitely lower interest, possible government funded stimulus money.

          Further the construction of these properties reduces the land available to domestic construction, requires vast amounts of domestic money in the approval, monitoring, bureaucratic process which the government funds, the increase in utility costs in supplying services to these mega-structures which are almost entirely domestically funded via GST and other expenditure taxes which do not materialise adding a cost to all citizens which is funding these foreign purchases.

          So the opportunity cost to others, the restriction of supply, service costs, increase in debt servicing – the list is considerable of costs to the domestic economy via this process – it is not simply a case of increased supply with no impact – no way, no chance, sorry.

    • GunnamattaMEMBER

      I dont actually see it is a foreigner land purchase phobia and not as a Chinese issue

      It is more that the volumes of foreign real estate purchases in Australia – average AUD$20 Billion per year over the last two years is of such a volume as to keep prices significantly higher than they may be without them, and that this is a significant factor in the pricing of a significant section of Australian society out of owning their own home, except in such circumstances as they take on a sufficient volume of debt as to reward the speculative impulse of a significant section of multiple home owning portion of Australian society.

      IE. I suspect that foreign real estate purchases are being used to help feed younger generations to highly leveraged baby booming types.

      Indeed if real estate prices are brought down to their historical norms – and there has plenty of discussion here about land banking, urban growth boundaries, development processes, negative gearing, Australia’s lack of a land tax to push a use it or lose it approach, service provision costs, and a whole load of other factors contributing Australia’s inordinately high real estate costs, and the impact this has in terms of debt stress – I couldnt give a toss if every last person in China, India, UK, US, and NZ bought a quarter acre block in Australia (environmental impacts notwithstanding).

      • Gunna, your not making much sense today. It would seem that your only objection is to foreigners over paying for Aussie RE.

        Foreigners do result in additional demand so in a supply constrained system this will cause prices to increase. It would seem easier for Australia (given its geographic size) to provide all the supply the rest of the world could possibly want.

        Personally, as a tenant, I’ll take a Chinese absentee land-lord over a local Aussie any time, because they have no ability or interest in interfering in my life as a tenant, all they want is a stable LONG term renter, the longer the better.

        • dumb_non_economist

          China Bob,

          The problem is that the supply constraint isn’t being attended to and isn’t going to be attended to. So foreign demand is having an effect on prices or is likely to.

          While I can’t speak about absentee Chinese landlords, I did live in HK for 5 yrs and would say they can be quite demanding and less than attentive when it comes to maintenance issues.

        • GunnamattaMEMBER

          China Bob sorry if I wasnt clear. I have no problems with Chinese landlords

          My objection is that the real estate industry and government are using foreign demand to keep prices higher at the expense of non owners, for the benefit of highly leveraged property speculating types.

  7. Liu MianzhiMEMBER

    The long and the short of it is that there is in fact no law against a foreigner buying “urban land” (ie residential property) in Australia per se.

    You are merely obliged to notify of the purchase. The Treasurer then has the power (if he so chooses) to reject the purchase if it is deemed contrary to the national interest.

    (source: Foreign Acquisitions & Takeovers Act)

    But 99.9% of notifications are approved (source: FIRB Annual Report). So in practice there is no restriction on the purchase of “urban land”. The changes in 2007 – 2010 were to amend the Regulations to exempt temporary residents from notification obligations – it did not change the actual entitlement to buy.

    I have seen people assert that you cannot buy established property etc, but as far as I can ascertain (looking at the legislation) that is not the legal position. It is just a “policy” which, whether through generous application of the policy or lax enforcement, does not appear to be applied in practice (99.9% self-compliance is just not credible).

    Maybe a good thing. Maybe a bad thing. But that is the current state of the law as far as I can tell. And there seems to be a lot of misinformation in this area (…and hopefully I have not just added to that).

    • GunnamattaMEMBER

      ‘(…and hopefully I have not just added to that).’

      Chief, your comments are just what IS needed. Someone who has access to the laws, obviously knows them well, and can recognise the application of the laws and can see them in the stories, experiences and thoughts of others. Post more.

  8. Who cares what the PC morons have to say. This is open slather on our properties.
    It has got to stop.

    • Yes it does. The PC thing is a clever smokescreen to stop debate on all sorts of issues that are creeping up on us including this one. Fight it. Don’t vote for either main party. Vote stable Population Party. Tell everyone you know.

    • The reality is that Australian citizens are funding huge wealth via capital gains of foreign investors via what appears to be a cycle of exponential debt servicing.

      Australians are paying for this Chinese capital gain – an virtual tax, but a flat out wealth transfer from Australians to Chinese.

      This is a truly shocking level of corruption driven entirely by the interests of land bankers and developers.

      The lobbying and payments to politicians needs to be investigated immediately in this regard.

      I too am completely disgusted by this process.

      • @Giordano Bruno

        Vote Sustainable Population Party to fix everything that is so wrong with Australia.

        • Fine, if you like voting for those whose only policy is to stop foreigners from Asia etc. coming to Australia, while having no policy about Australians living sustainably 🙂

          It’s not about people outside Australia, but how we live.

          They maybe wet, but at least the Greens for whom I have never voted for, resist the Australian xenophobic temptation to blame foreigners for everything, and making a false or distorted causal link between sustainability and population (which is stagnant for permanent residents).

          • What are you talking about? Population is at the root of every problem we have. It has nothing to do with xenophobia. I wish we didn’t all learn that stupid word.

            “It’s not about people outside Australia, but how we live.”…..that is frankly ridiculous, and is a big smoke screen that that suits business and government. It’s a con.

            Are you saying it’s all okay to double our population while reducing our personal impact by say 10%? Do the sums, you’re wrong.

            Greens policy should be all about stabilizing population but it’s not, because they’re not that bright. Every ecologist on the planet knows this. Check out the backgrounds of Stable PP. They’re mostly scientists and others who have a direct understanding….like ex population ministers for example.

            Open your eyes and you will see.

          • You call us xenophobic? After all the immigrants we already have? You’re a clueless infant.

            The Stable Population Party’s policy is simply to reduce the numbers of immigrants, down to about 80k. The races of those 80k will remain in the same proportion as they are. So you’ll get 20% Chinese, 20% from the UK, etc.

            It’s about how we live is it? Sure, we could probably be very green if we all lived in high rises and lived on lentils like how the Greens want us to.

            Nobody blames foreigners, we blame the pigs(who are probably 80-90% white) that use them to prop up and exacerbate ridiculous house prices.

          • I recall there being a potential GetUp! campaign about removing negative gearing, GetUp! ultimately decided not to support it.

            So therefore it’s quite clear that the Greens have no intention of providing affordable housing. Seeing as a lot of the Greens supporters are in rich, Inner West areas and probably have investment properties, why would they?

            Face it, the Greens are a joke, just another bunch of people who want to sit at the top and have power and ride a gravy train.

          • Most, who are simply demographic ignorant, have no idea of what our death rates will do over the next 2.5 decades and think that population growth is all about babies or immigrants and have no clue at all about our demographic momentum, our peaking emigration or our possible population peak and decline around 2035 to 2040. They also have no idea that we count temp visa holders who is here longer than 12 months in our official population growth rates. As AIEC has pointed out before, this is against OECD best advice andss as mad a batpoo.
            I wonder if those population alarmists are concerened about the population decline in Brisbane burbs from 2006 to 2011 such as Jindalee, Rochelade, Chelmer, Rocklea for example. Nope, no idea at all.

          • @willynilly,

            No, don’t care about a few suburbs in Brisbane losing a few people. Seems irrelevant.

            Aging of the population being a problem is debunked here:

            http://www.abc.net.au/unleashed/44578.html

            It’s quite clear that our demographic momentum, if you take away immigration, is for a smaller population, as house prices are too expensive, our roads are too clogged and it’s all too intense out there to enjoy a free range lifestyle which would put a lot of people off breeding.

            We survived for 200+ years with a smaller population, and there’s no reason why we can’t go for another 200.

            You’re from Coolum aren’t you? Seems as though you wouldn’t know how bad the situation is in our big cities.

            Sure maybe you could get some immigrants in our regional towns, but what are they going to do for work? Are we going to magically create another silicon valley? Bring out some competition for Apple and Microsoft? Get everyone to use an Australian operating system? Doesn’t sound likely.

          • Moops
            1. demographics momentum is more people living longer or 1/3 of our actual growth in real numbers, due to the increased longevity.
            2. There is no doubt about what the ageing costs will be. 80% of the boomers will require full or part pensions and their average super is approx $60k.
            3. I support a population peak and then a decline and would in fact have our NOM as neutral or even negative as that is where our natural growth may be when our death boom, a reflection of the baby boom, starts in earnest.
            4. I can see OZ growing our GDP while our population declines as the policy will be forward looking, rather than the 30 odd years of rear view policy we have had.
            5. Half the world has a fertility rate less than replacement value, so it is also very likely that global population will peak this mid century and then start its quite rapid decline.

            I actually think you and I have similar view re our demographics, however I am under no illusion that the real concern is the consumption by the population, rather than the actual real number of people. That to me is able sustainability. The abc report is no real substance.

            My point about burbs with declining populations is that 99% of Australians would have no idea about this at all.

            can I suggest you have a look at Pete Aclorne video on a positive future.
            http://www.thepauk.com/2012/09/time-for-future.html

      • i agree. but i don’t think it will change. the vested interests are too strong and Australians are too apathetic. the only way is for the majority of young people to leave the country in droves, or start rioting on the streets. lol…
        voting for some party wont change anything

        • Certainly nothing will change if you just do another donkey vote.

          I don’t like that mentality. “oh, no one will vote for them so I won’t vote for them so nothing will change”.

          So just vote for them, you’ve clearly got nothing to lose.

          • moops, any single policy party will never succeed. As I said the party is ‘The Stable Population Party’ and does not even in its name talk about sustainability or consumption. Yes, you may say they have multiple policies, however a name that they have indicates to the masses, that they do not. It would be better called the ‘Sustain and Prosper Party’

          • @Willynilly
            I bet nobody thought Oakeshott and the other independents would win and be so significant last election.

            We’ll see.

            The Liberals seem to be nearly a single policy party too. Ok, maybe 2 or 3. Stop the boats. Stop the carbon tax. Stop the NBN.

          • I can almost guarantee they are leaving because of high house prices and because of the mindless mass immigration.

            How professional are they anyway? Do they do real work? Do they have some cereal box degree? Is this such a great loss?

          • Moops, I have talked with one group of nine medical professionals who moved to Texas and yes,m they are leaving as housing is unaffordable and our cost of living is too high. They are real professionals!

          • Moops
            1. GST must rise to 20% and the tax free wage threshold to at least $45k, so we tax the over 65’s more
            2. We also need a land tax
            3. We also need to included the PPOR value over $750k towards the pension means test.

          • So the idea is to retain the real professionals by reducing the dross.

            That’s one idea.

            But I think it’s cruel to take doctors from developing countries. Not that I am assuming the 9 you are talking about are from developing countries.

            You need to get about 99% in the HSC to do medicine, I don’t think it would hurt to reduce it to 96%. That’s assuming we have a shortage of doctors, and in my experience we don’t in Sydney.

          • talkfinance dot net and look at the “demographics’ section for more data and articles.

          • Willy,

            I am not surprised professionals are leaving, looking for an easy life in another land.

            You probably know the problems that regional communites have finding doctors etc. People have different ideas in these current times than the boomers did. Just think a reason that trades people have been paid such high wages lately is that many young people don’t want to get their hands dirty and I expect in years to come that cleaners will become the highest paid workers. Maybe fair enough too.

            It appears that your plan is urban infil, take the inner land off the older generation (remember that they moved to what was the outer burbs for cheaper prices years ago) so that the younger generation can stay in town.

            Applying land tax to home owners is exactly the same principle as a Deposit Tax used by the EU. Fair on those who don’t have the misfortune to cop the tax.

            Fairly distributed Rates should be charged for the services within the local community not a Land Tax.

            If the boomers had applied a hefty land tax there wouldn’t be any land to infil now because they would have sent their parents to the bush already

  9. SchillersMEMBER

    The relatively recent changes made to the rules regarding foreign investment in Australian residential RE were major, not minor. They have added significant demand pressure to a market that was already restricted and very expensive. As foreign money has come flooding in, first home buyers have been priced out and relegated to peripheral areas bereft of jobs and infrastructure. Now unlimited and unrestricted foreign “investment” has pushed up the price of land close to the CBD, the spillover effect of which has significantly increased the price of land in surrounding areas.

    How is this a good thing for “average working families”?

    It would be helpful to see a comparison between the FIRB rules that applied prior to Rudd/Gillard with the current situation. Imo, there was nothing wrong with the FIRB rules that had existed for decades. The changes simply turned on the tap of unlimited foreign capital into a market that did not and does not need it.

    Do we really want to become another Hong Kong or Singapore? And without their infrastructure. Believe me (in Sydney and Melbourne) we are heading there. And quickly.

    • “Do we really want to become another Hong Kong or Singapore” What you want is immaterial – that’s where all Australasia is off to; we’ve been told in as many White Papers etc as you like…. and “Believe me (in Sydney and Melbourne) we are heading there. And quickly.” See !!!

    • With a virtually unlimited supply of foreign investors keen to buy up Australian real estate at any price, and with an unlimited supply of developers and vested interests profiting from selling out Australia from beneath our very feet, maybe the bubble which should have burst years ago, will just keep inflating higher and higher.

      When you think about it, what the Rudd/Gillard government has done can be compared with treason – favouring foreign investment over Australians being able to afford their own home. Both prices and rents are pushed up by encouraging foreign funds into this great country just to keep prices up.

      Those who got in before are sitting on fortunes, and those who missed the boat will be unfairly punished for a very long time to come.

      And in the meantime, we have no say on whether we want Sydney and Melbourne to become another Hong Kong or Singapore. The Planning Ministers are all too keen for that to happen, as are developers. It does seem kind of ridiculous though, with so much land in the rest of Australia, making us, on average one of the most sparsely populated countries in the world at the same time as having such congested cities.

  10. Long time lurker, first time commenter… But, who cares? The joke is on any foreigner who buys in Oz. There is a wealth of better property investments out there for anyone with half a brain.

  11. If selling unprocessed iron ore to foreigners has any merit at all then selling sand, gravel and timber and plants to foreigners with the addition of a large amount of Australian labour through the supply chain must be an excellent thing.

    Dwellings are a manufacturing industry in essence, taking mainly Australian resources and processing them into a finished product. Then there is the additional benefit that they remain in Australia for use (at a price) for those who want them.

    The foreign investors might also drive up the price a bit but that is good for the 65% who own or are buying their own homes (in terms of return on equity and cashing out to supplement retirement standard of living.

    Sure, it is not so good for those who want property prices to fall and who delay purchasing, and it may over a long period lead to higher costs throughout the economy or a housing crash.

    But maybe it is worth it in terms of the job creation and “export” dollars earned.

    • That is an intelligent comment Explorer, and not only that the asset stays in Australia and cannot be exported. This has to be a good.

      Also if there is a crash as a lot of you are anticipating don’t foreign investors usually take the losses, sell the property and leave like the Japanese did in Surfers Paradise many years ago?

      Furthermore a Capital Gain is taxable (if they have not already taken the money and run)and it would be easy to increase the CGT for Foreigner’s RE investments if the gov were inclined to do so…

  12. The fact is speculative investment in established real estate serves no purpose other than disenfranchising those without the access to cheap capital.

    To allow this domestically is pathetic enough – to introduce foreign capital by countries essentially printing their own cash is beyond stupid.

    This needs to be fixed!

    • Foreign investment is kept several ways.

      1. The property remains in Australia and is not going anywhere
      2. Any financial loss with a property or currency devaluation is to the country the funds came from (like Cypriot Banks where the Greeks gained or the problems Lynas face in Malaysia could be a problem for Australians)
      3. Any Financial Gain is taxed and the tax is used for Australians
      4. The money used for the purchased funded Aussie Jobs and possibly other bulding works

      However I sentimentally like your idea

      • That’s rubbish. Speculative capital is preferentially taxed in Australia – as compared to earnings from work.

        The loose cash very rarely pays tax – it just roots the market up for a long time and then generates a loss. The period between when the speculators hit the wall and when the game starts does a lot of damage.

        Speculators in established real-estate are parasites.

        • from the ATO:

          Tax rates for non-resident taxpayers
          Item For the part of the ordinary taxable
          income of the taxpayer that:
          The rate is:
          1 does not exceed $80,000 The second resident personal tax rate
          2 exceeds $80,000 but does not exceed
          $180,000 37%
          3 exceeds $180,000 45%

          and;

          Foreign residents

          If you are a foreign resident for the full year, the following rates apply:

          Tax rates 2012-13

          The following rates for 2012-13 apply from 1 July 2012.

          Taxable income
          Tax on this income

          0 – $80,000
          32.5c for each $1

          $80,001 – $180,000
          $26,000 plus 37c for each $1 over $80,000

          $180,001 and over
          $63,000 plus 45c for each $1 over $180,000

          and;

          Removal of the capital gains tax discount for non-residents

          The government will remove eligibility for the 50% discount on capital gains earned after 8 May 2012 by non-residents on taxable Australian property, such as real estate and mining assets. Non-residents will still be entitled to a discount on capital gains accrued prior to Budget night (after offsetting any capital losses), provided they choose to value the asset as at that time.

          It think this means the gov doesn’t give preferential treatment to foreign speculators whether living overseas or in Australia in fact they may be more beneficial than the Australian ones, but please correct me if my interpretation is incorrect. I would hate to spread misinformation

  13. Theoretical tax rates and actually collecting the tax are two very different things. I don’t think it would be too difficult, as a person living overseas, to

    1. Sell some residential real estate here in Australia for a capital gain.

    2. Repatriate those gains overseas through normal banking channels.

    3. ‘Forget’ to declare and pay tax on the capital gain.

    I mean, in practical terms, which Australian Government agency is going to hunt someone down, particularly in populous countries to our North, and demand they ‘pony up’? Can you see it happening?

      • GunnamattaMEMBER

        Interesting points gents, but I tend to see the economic impact only partly in terms of the investment and people looking for capital gains (no matter whether they are taxed or not).

        I would suspect another major economic impact is the ‘wealth effect’ of rising prices which basically has every man jack of us splashing out on a large array of imported goods adding to our current account issues, and sending the money offshore in another guise.

        I dont know who (if anyone) has accurately mapped the actual economic flows relating to housing (investment in, materials, beneficiaries, secondary effects, government revenue effects, employment effects etc, but they would be interesting to know. I dont know enough about it, but tend to suspect that the RBA and government trying to spark employment growth through housing construction is likely to have unintended consequences.

        • Oh by the way Gunnamatta, I have done a number of input-output studies over the years looking at the flow-on and labour creation effects of residential construction and renovation. the first was SIROMATH (1984). I dont think one has been done for 15-20 years though. We also didnt look at government clawback.

          Typically the full employment multiplier is about 3:1, The direct effects are about 1.8:1. Housing is one of the best sectors for local employment generation because so little of it leaks to imports.

  14. Hmm I have had a number of people tell me foreign investment (especially Chinese) has been driving the Australian property market, just like West Coast USA. But I don’t buy it, Australians are perfectly capable of digging their own holes and pricing themselves out of their own market, with heavy assistance from the government

    Are there any data on what is being bought by foreign residents and how big a slice of the market is involved?

  15. I’m amazed to read about all this – Im supposed to be a housing economist and never heard of it.

    The rules sound pretty good actually – more money in new construction is exactly what we need. If we can get the rental vacancy rate up near 9-11% like the USA and like instead of the disastrous 1-3% we currently labour under, many of our housing problems could be solved.

    One does puzzle about why they bother to bring in such a law and spend nothing on enforcing it except sticking up a useless website.

    The part where they allow demolition is an unpleasant loophole. This does not add to the stock, and probably encourages knocking down nice old places and replacing them with the sort of jerry-built monstrosities we see all over the place here in South Melbourne and which are covered in cracks in a few years.

  16. This does not add to the stock, and probably encourages knocking down nice old places and replacing them with the sort of jerry-built monstrosities

    Also number-crunching shortage-deniers assume that an extra dwelling was created to oversupply the need from extra people. In reality one Aussie family is displaced by an empty “investment” box.