Middle men party as houses go to China

By Leith van Onselen

ABC’s 7.30 Report last night screened an interesting segment on the increased foreign buying of Australian residential real estate.

Chief executive of McGrath Estate Agents, John McGrath, describes foreign interest as “unprecedented” and the biggest surge in buying in his 30 years in real estate, claiming that “in some suburbs 90% of new product will sell to Chinese buyers”.

Others are not so enthused, with buyers agent Patrick Bright claiming that Australia is “selling the farm or the city”, which is pushing-up the cost for first home buyers. Finance analyst Martin North agrees, although he believes foreigners are only one part of the problem:

“First home buyers find they can’t afford to buy because prices are too high”.

“Also when you attend an auction you discover that investors from overseas, local investors and baby boomers are all also trying to buy the same property.”

In my view, the best way to counter concerns around foreign investment is to abandon the urban consolidation policies pursued by Australia’s state governments, which are incompatible with Australia’s high-growth population policy, act to force-up land prices, and worsen housing affordability. Rather, land supply should be deregulated – or at least significantly increased – along with the implementation of “right to build” laws that give land owners the express right to develop their land (subject to minimum performance standards) unless there is a genuine environmental/social reason not to do so.

With genuine competition between land owners and developers, lower land prices, and an associated boost to the supply of affordable housing, concerns around foreign investment will dissipate, since domestic buyers will no longer feel shut-out and won’t be in search of a scapegoat. But as long as Australia’s governments continue to pump demand and choke supply, some buyers will continue to miss-out, and foreign investment will remain a hot issue.

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Comments

    • Good idea.
      Send the letter REGISTERED MAIL to make member acknowledge receipt.
      Will make a good coat hangar later.

    • Better still, if you suspect an existing dwelling has been purchased by a non-permanent resident, email the details to

      [email protected]

      and cc your Federal member outlining your concerns about the lack of FIRB transparency and accountability. Request a written response. (oh and let us know what they say)

      • The money is coming from non residents. The purchaser of record is a local resident relative or trust or company. But the money and “orders” are coming from foreign residents, with the intention they will come here and become residents in the future.

        Correct me if im wrong but the FIRB compliance does not apply to this.

        The real estate guy i sometimes lunch with in the local food hall here tells me he is advertising for 3 Chinese speaking staff because of the demand.

        • If the money comes from offshore, the supplier of the money has an equitable interest in the property and this must be declared to the FIRB.

        • There are numerous anecdotal examples both here and elsewhere of foreign nationals buying existing dwellings whilst in this country on temporary visas.

          Without prior FIRB approval this practice illegal and the sales are voidable by the FIRB.

          The FIRB does not conduct unsolicited audits or checking of existing dwelling sales for compliance.

          If these illegal sales are not referred to the FIRB via the above email, they will remain undetected.

          • Report them to both the above email AND the media….AND anyone got any ideas re getting a list going? Given it would be sensitive information obviously….

            Anyone got specific details of the legislation that is being (allegedly) contravened?….I’ll write to my member and the media….

          • “Without prior FIRB approval this practice is illegal and the sales are voidable by the FIRB.”

            Sales of existing, established dwellings are perfectly legal to foreign nationals with temporary residence visas. Until 2008 there was a maximum spend limit of $300,000. This cap was abolished by the ALP as part of it’s response to the GFC. There is currently no price limit at all. This change has resulted in an explosion of demand from the families of students studying in Australia for example.

            The really interesting one is the ability of foreign nationals to purchase “new” property. Prior to 2008 these type of sales were restricted to off the plan purchases of units and apartments in new developments. A limit of no more than 50% was allowed to be sold to foreigners in any one development. The rest of the “new” build had to be held and sold to locals. Again, in 2008 the ALP changed this rule to allow 100% of sales in new developments to go to offshore buyers. And, (as the ABC 7.30 report showed) there is no shortage of foreign buyers out there.

          • “Without prior FIRB approval, the sale is illegal and voidable via the FIRB. Purchase without prior FIRB approval is also an offence under the FATA punishable by fine.”

            This is correct, however approval is invariably a formality…

            “Foreign persons need to apply to buy new dwellings in Australia and such applications are normally approved.”
            http://www.firb.gov.au/content/real_estate/residential/available_to_all.asp#new

            And furthermore: (ref. http://www.firb.gov.au/content/guidance/downloads/gn3_jan2012.pdf)…

            “Non-resident foreign persons need to apply to buy new dwellings in Australia. Such proposals are normally approved without conditions.”

          • “Foreign persons need to apply to buy new dwellings in Australia and such applications are normally approved.”

            My comments are in relation to EXISTING dwellings only. In any event we are on the same page, I just think the FIRB needs a kick in the ass first while we change the laws back to the way they were.(which is I think what you are advocating)

          • They usually do the FIRB paperwork after the Auction.

            Has anyone heard of an Auction been voided by FIRB?

    • All booms bust and history shows us they go back to where the they started.

      The Chinese will be spanked and then some for their “investments” in property – both here and in their homeland.

      IMO, this will create the next meltdown worldwide (unless Spain defaults).

      Chinese property has multiplied 10 fold in some areas – compare that to the US at 2.5 … and Australia, wait for it, wait for it …

      … a mere 3.5 times – yes a bigger bubble than the USA. So a bigger mess on the way.

      Forget property, it is too late and too deep into the cycle – all booms bust.

      Australian needs to address overall GDP for the next 10 years as we deal with X Gen’s peak spending – just starting – the hole due to their decreasing numbers is the only game in town. The Australian economy is lagging others due to the mining boom holding it up and the tight supply in property – THIS WILL CHANGE.

      Watch out below, asset prices will get belted, then add that to the inevitable Chinese meltdown.

      Bottom line – forget about Chinese property investment, they will lose their dough. Concentrate on how we grow this economy and avoid the demographic cliff as X Gen try to deal with the set of cards they are handed (early Y Gen hold even worse cards – peak debt occurs at 42, 1975 plus 42, so the average Y Gener is completely stuffed and will be a financial slave to the banks when this all caves in – no equity in their home, repossession and significant money owed to the banks, no asset and maybe no job).

      Encourage fellow Commonwealth folk to relocate to Australia to fill the hole? Probably too late now – and that is about the only answer to the demographic cliff – you need people to replace people … to spend.

      It is ugly ahead, I wouldn’t be worried about the Chinese doing their dough in this country – it is just a repeat of the last foreign boom (Japanese) – only this time it is worse … yes folks a bigger bubble, so inevitably a bigger …. fall!!!

  1. Its not just residential housing that’s an issue, Chinese developers are paying hand over fist for anything and everything in the Chinese suburbs(lane cove, Chatswong, Hurstville, Eastwood, Ryde, CBD, etc…)

    There is no land that is safe from foreign developers paying ridiculous prices to sell at ridiculous prices to their homeland counterparts.

    • Does anyone remember when the Japanese did this in the late 1980’s? If it had a blade of grass on it and they overpaid for it.

      Is there any chance that that scenario could repeat with the Chinese?

  2. It’s a huge market distortion and needs to be stopped. Around the SE of Melb all kinds of mostly 1-bed developments are springing up. In theory these developments are targeted at students or maybe FHB. But in practice, they are just places for Chinese to park money or local investors to get a small piece of the action. As a component of our housing stock, they are highly suboptimal and many sit empty following completion.

    If we don’t stop this nonsense we will end up with stacks of useless housing, as well as a market distorted by the crazies ploughing their cash into these ventures.

  3. I happen to know Chinese nationals who have bought high end Sydney real estate using a CNY denominated mortgage. They left the FX unhedged. Good luck with that!

    There are still more millionares in each of the US, Japan and the UK than in China, yet we don’t see speculative buying from them. Furthermore, only 1% of Australia’s population was born in China.

    With apartment prices in Beijing at 66x income, how can this be anything other than a (temporary) speculative bubble, circa Japan 1989? I just cannot fathom that China, a nation that is still mostly poor farmers, is inherently wealthy enough to buy up the whole world. It is all credit driven and unsustainable.

    • I happen to know Chinese nationals who have bought high end Sydney real estate using a CNY denominated mortgage.

      A fact that escapes many when they see cash.

      Considering our own financial institutions are giving out mortgages backed by Oz real estate in foreign countries, is it surprising?

      • Australian banks hedge their offshore issuance with cross currency swaps, so it’s not really a relevant comparison. Our banks are not exposed to currency movements in this way, and nor are the investors in mortgage backed securities.

        • Apologies, I wasn’t implying this. I was implying that with easy availability of credit for foreigners to buy Oz property if it was surprising that they were buying and in the process are probably over exerting themselves and Oz.

          To the casual observer, it looks like some Chinese millionaire buying in cash.

    • I find it interesting the way people have these stereotypes and misconceptions, and genuinely believe that what they “reckon”, their “vibe” is somehow the equivalent of the truth, no matter how utterly devoid of facts or information.

      For example China has the third highest number of millionaires on earth, and if you add Hong Kong it is number two.

      See here.

      http://www.usatoday.com/story/money/business/2013/09/15/countries-most-billionaires/2811571/

      In fact, the Asia pacific now has more millionaires that the US

      http://www.telegraph.co.uk/finance/globalbusiness/9554352/Asia-Pacific-now-has-more-millionaires-than-US.html

      .

      So hopefully that should set a few of your misconceptions to rest and explain why the Chinese are buying so much.

      And with the Yuan about to appreciate via it’s unpegging of the US dollar expect things to change very rapidly – and in the resultant inflation from both increased demand via a more powerful Yuan and currency variation and things are going to change very, very quickly.

      Hobbes.

      • Just like all the other who “reckon” that any asian looking fellow is a foreigner and they are all buying with cash?

        It would be interesting to do an analysis of the breakdown in assets of these millionaires.

        As an example, Oz millionaires have on average over 40% of their wealth in property vs ~ 20% in the US and even less in Japan.

        What happens if the asian (incl Oz ) property bubbles goes pop?

        • There were a lot of ‘rich’ in Ireland until the bubble went pop. Same in the US as property values collapsed and wiped house values. People in Australia brag about being millionaires – all an illusion when the house of cards collapses.

      • Mate – you need to understand basic supply and demand models.

        This is the biggest bubble in history (Chinese property) – do some research. For example, 70% of the wealth generated in China (“new rich”) is invested in their property bubble.

        But that figure does not account for the borrowed money to buy the asset.

        How do the bank balance sheets look in China? Property is a bubble – biggest in the histry of this planet.

        Property “investment” is not the river of gold you think. Not this late in the cycle.

        When the bubble bursts you will get to understand the other side of the boom.

        When is the only question in town.

        IMO, maybe next year?

        • Actually, the simplistic supply and demand model does not adequately explain how bubbles form across different asset classes including property.

          However, the points you make are relevant with respect to China in terms debt and its massive property bubble.

    • It is all dirty money driven. I have witness the similar event in Eastern Europe after the brake of Berlin wall. Communist party elite and all criminals immigrated with boxes full of cash in Western countries, mostly Switzerland and Austria, and later their money returned as foreign investments in new market economies. Good luck for us all with Chinese communist elite and criminals.

      • “It is all dirty money driven”

        What a ridiculous comment. This is by far the worst thing I’ve ever read on this site and I can’t believe that no one has pulled you up for it. The rest of your comment isn’t much better either. “all criminals immigrated with boxes full of cash”. Turnitup!

        • Today we meet a man who knows Sweet FA about the wealth acquisition process and those who have access to it in (particularly) the post communist world.

          Sorry champ, how did you think people in the post communist world gain access to wealth? And did you think they want to invest here because of the magnificent investment potential of Australia or because they simply want their dough away from wherever the central committee can know what they have?

          I hope you havent been reading too much about perfect markets in whatever childrens fairytales you have fingered through today.

          Lori, your comments are pretty much spot on for mine (as someone who spent ten years covering business and economic issues in that part of the world for international media and who still does work for legal outfits and investment banks in it – as opposed to pontificating about it from Brighton)

          • So it’s all dirty money coming into Oz? You might want to think a little more deeply about what this means Chief.

          • Yeah, as a nation we lick up dogs vomit from any flyblown sack carrier winging their way in to bury some foetid lucre while fertilizing our real estate sector.

            A man of the world like you, presumably you would have a real extensive list of wealth acquisition process that were clean for inhabitants of, say, the middle kingdom or wherever.

            Make sure you dont include teachers who take payoffs, or schools which encourage them. Or maybe doctors and medical professionals who do the same and the hospitals and insurance companies that encourage that. Then when you get to all those honest shopkeepers, make sure they arent paying any officials (or anyone) for bits of paper, which when you look closer suddenly becomes a protection racket. and when you look at those officials……come to think of it maybe you shouldnt look at them……Large company employees I hear you say? Would they rig an acquisition process or keep a spare soul on the books to collect an extra wage? Would they put something in their pocket while taking payment for a service or good?

            And then again who has access to the money to start a business?

            What it means is that we provide a payoff through our visa allocation and real estate purchasing permission systems which rewards the sorts of behaviours in other nations that we wouldnt tolerate here. And that nobody but nobody (and particularly FIRB) would ever dream of asking about the veracity of any given wealth acquisition process.

            Thats what it means.

          • Yeah I get that. But what I don’t get is why you seem so shocked by it. Rewind 220 years ago. We steal some land and make the owners 2nd class citizens in their own country. Then we rape the land, sell that and become ‘prosperous’. Now that’s come to an end, what do you expect? Time to lower your expectations, or emigrate. Or do what I do, bury my head in the sand and live my life. No point pining for the ‘old’ Australia, she is goneski.

          • So what is it you tell these kids you work with about why they should obey laws?

            Should we be teaching them a little more real world skill? Like how to get someone biffed or how tio intimidate others into handing over the readies?

            Or should we teach them life is just a long accounting process – and relationships are just contracts in another guise? As long as grandpa knows that when he gets stashed in a nursing home.

            Goneski will apply to some things we may want to keep

          • @Gunna He goes in the same list as dam et al.

            @Turnitup

            Time to lower your expectations, or emigrate.

            I met three people today who are contemplating this. Highly educated (all PhDs), two with young families, dual professional incomes (atleast two of them). Why? Because the cost of living is too high here. One a long time friend said to me that he has given up hope of owning his own place…ever.

            Be very careful what you wish for.

            Or do what I do, bury my head in the sand and live my life.

            Some of us actually care about what happens to this country and future generations.

          • Ff, I care too, but I choose to roll up my sleeves and DO something about it rather than become a slave to this self-indulgent victim-mentality whinge fest. There is a whole bloody life out there waiting to be lived mate! BTW, I hope you’re as passionate about Indigenous affairs as you are about house prices for people who already have so much. And another BTW, your attempt to categorise me with another poster was pretty piss weak. Tells me you’re suffering from a seige mentality; us against them.

          • but I choose to roll up my sleeves and DO something about it

            As do I and I am living my life mate. I have been extremely fortunate in my life and I have no reason to personally whinge as you so eloquently put (neither do you judging by where you live).

            BTW, I hope you’re as passionate about Indigenous affairs as you

            I am. There used to be a sign tagged outside Redfern Station.

            40K years is a long time, 40K years still on my mind

            It’s is forever etched into memory.

            your attempt to categorise me with another poster was pretty piss weak. Tells me you’re suffering from a seige mentality

            No seige mentality here. If anything my partner and I will loose out big time if property prices drop significantly worldwide.

            As to the categorization, if the shoe fits ..

          • Yeah @flyingfox

            any idiot knows that dam cant spell or even string a sentence together in his pro spruiking posts, whereas it would appear that @turnitup is mildly literate.

            But its @turnitup’s reasoning processes I am more interested in.

            ‘I choose to roll up my sleeves and DO something about it rather than become a slave to this self-indulgent victim-mentality whinge fest.’

            …..said just like any aspiring Al-Qaeda man.

            For some people raising issues reasonably and thinking about them comes before doing something about them, because the doing something about them can take forms that the other members of society have marginal concerns about. The again you’d know all about that from your extensive understanding of emerging world wealth acquisition processes. Doing is everything and thinking is nothing – and life is cheap.

          • @ff, I won’t be engaging in any more conversation with you. Goodbye.

            @Gunna, you’re an educated person. Are you going to tell me, with a straight face, that there’s not a whole heap of self-indulgence happening in here? Thinking about issues is wonderful. But most posters are ‘thinking’ very narrowly about themselves, how they can make money and how they can preserve ‘their’ version of Australia. They can see it slipping away and they’re angry.

          • GunnamattaMEMBER

            @turnitup

            just about every comment, opinion piece, leader, whatever has a considerable degree of self interest in it. Just about all here do too.

            self interest or self indulgence? well thats in the eye of the beholder.

            Most posters here are reflecting their personal circumstances and views. Many of them – if we may cut to the chase for a minute – seemingly regret that the concept of fairness to which they may once have been led to believe applied in things like law and administrative processes and policy development, may not apply in the way in which they once believed it did. Some of them are angry and resentful. I tend to agree with them (just so we can be overt about where my personal sympathies reside)

            Then there are others who think that in some way they have the box seat and/or are relatively immune from changes in society they see unfolding – they tend to point to their own versions of fairness and whatever logic it is that they feel suits their self interest, or, in some cases, start to indulge in what may appear to the casual observer less as a rationalised consideration of socio economic dynamics, than a primitive personal expression of hubris.

            Takes all kinds. But theres no point arguing for a process (particularly espousing that it is fair or reasonable or whatever) when the only thing that counts is take what you can by any self regulatory means you can, and then lecture the punting masses about it later.

            Those punting masses, and I’ve seen it up close, do eventually bite back. When their existences are cheapened enough (relative to the societies they live in) they have less to lose in turning things over.

          • @Turnitup

            Ok by me. The truth always hurts ….

            Are you going to tell me, with a straight face, that there’s not a whole heap of self-indulgence happening in here?

            Ofcourse, that’s human nature. However you seem to be pointing this at the few around here that don’t seem to be self indulgent and are genuinely concerned about where the country is heading.

  4. Leith,

    I agree with your points re urban consol policies but surely the more immediate regulatory step to boost supply is to ensure that the foreign investment is going into new builds not into existing dwellings.

  5. You can’t just have people developing land anywhere without a transport plan to go along with it. And while developing new green fields land will help with supply, it won’t help with supply in the areas people really want to live, so its hardly a complete alternative to infill.

  6. There’s too much anecdotal evidence, from both people on the ground and industry that foreign buyers are buying up a lot of houses and pushing prices up.

    I feel so terrible inside knowing that
    1. My country is being devastated by IMO evil leaders
    2. That people actually voted them in
    3. I can’t do anything about it and no-one is willing

    I wrote an email to all Victorian Parliament members in the link at the top of the comments but it’s really hopeless in the end isn’t it? I bet a vast majority own investment properties and could’t care less about those without.

    I feel terrible inside. If my mum wasn’t an issue, I’d be planning to leave this place for good. I hate this country for being full of rent seekers, idiotic evil politicians and even worse, voters who keep putting them in power.

    It’s a lucky country, and developed to an amazing level. Having a decade or so of intense financial repression can’t destroy it alone so maybe it doesn’t seem so bad but the wasted potential it has caused is heart breaking.

    My life would be so much better elsewhere as a 30% deposit here could buy me a great property outright in many great countries saving me years of crushing repayments

  7. temporary resident and foreign buyers have no business buying existing dwellings, this should be illegal and CHECKED upon ( as I know a tourist visa that has bought a house few months ago)

  8. Abbott is on record as being pro-foreign investors pushing up prices – the more the better.
    Rudd was a de facto RE salesman to China.
    His right-hand man, Creen, went out of his way to sell off Northern Aus.
    Plebersek, former Housing Min, oversaw RE price increases of 20%/yr in 2010.
    We can expect nothing from our elected pollies (maybe except Ludlam & Xenophone).
    More chance of getting a sane outcome via series of rock concerts where say musicians pen songs that fires the imagination of the youth and so prompts them to protest (peacefully please).
    Our pollies, MSM, banks and RE industry are against the general public.
    Time for the general public to respond with some sanity.

  9. May as well take advantage of these Chinese investors the same way Kerry Packer took advantage of Alan Bond.

    • …i.e. if you want to live in a concrete dog box with tiny rooms and questionable build quality.

      Have you ever been inside of a Meriton apartment?

  10. This is the template for our future. Our political and business leadership have no qualms in ensuring continuing growth in demand, where ever it comes from, no matter whose money. Maybe the Chinese will get burned, but frankly if they want to buy overpriced real estate let them f**k up their own economy without adding to the pressures here. Time to start drawing a line in the sand on this. The fu**ers selling us out now will be untouchable by the time this country has nothing left to sell.

    • ++++1 top post. China is already primed to go belly up and what the foreign investment real estate markets from around the world tells us is those that can flee are doing so or getting ready to. 15 trillion in USD equivalent from China invested predominately in domestic realestate bubbles and now in western countries around the world dwarfs the western world’s efforts to stem the black hole of deflationary toxic assets that have not gone away in how many years now….5 years since 2007-08. The Chinese are irrational investors quick and hasty to get that cash out of the motherland but what many have failed to consider from the past is that the Japanese were astute ans intelligent investors and they still went bankrupt….contrat this to China who are intrinsically corrupt from decades of deformed bureaucracy and combine this with over the top gambles and a pushy and quick flighted (short tempered nature) to get what they want now and fast and with no red tape and you have a pressure cooker ready to explode! These people (Chinese foreign investors) are not peaceful and of a contemplative nature, they are the young middle class raised in an era of unprecedented foreign capital that flooded their country in ways we can only imagine in our wildest dreams. They are so used to the quick and fast and money they do not know anymore what their own forebears did to live and the sacrifices they made for their children, they only know just get the hot money out, hide and hide it fast.

      What do the fascists that run our country to prevent harm to our country WHEN and those in the know, they know when all this comes to a pincer moment, what do they do…they do nothing but fuel the speculation…Hockey and Abbott and their neocon bureaucrats should be strung up in front of parliament house for all to see. They like their labor bretheren sold the Australian citizens out to parasitic monopoly capital corporates at the expense of anyone and everyone who stood in their way. As some of the memorable blogs on this site have stated we live in an unprecedented time in history and our nation. In years to come we will stand and remember and I for one will make sure my children will be so well educated in the tricks, lies and deceit these bastards have pushed on their own electorates they will never forget…

      Bring on 2015.

      • I agree. Many of these so called investors from China are probably doing a runner.

        As you commented the place is one gigantic bubble. I think China has more potential to collapse than the US. Of course, either one going down would probably pull down the other down.

        If it all goes pear shaped we may not be around.

    • GunnamattaMEMBER

      +1

      It all ends in tears somewhere for someone. Thats all the discussion is about. There will presumably be a backlash at some stage too.

      But if the tears are going to be shed by aspiring Australian home buyers (as opposed to aspiring immigrant home buyers, aspiring immigrant housing speculators, aspiring Australian speculators etc) then the political process that is apportioning the tears their way is basically treating them as chattels, and implicitly suggesting they dont commit to being here in any way. Not all will twig to that, mind, but enough will.

    • understand the scale of Illicit cash pouring out of China…and wonder no more.

      Chinese corruption is out of control. The latest report by Washington-based Global Financial Integrity (GFI) shows that cumulative illicit financial flows from China (primarily by corrupt officials) totaled a massive $3.8 trillion from 2000 to 2011.

      Are they getting it out because they see the writing on the wall in China from a highly polluted environment, massive credit and property bubble, societal instability (Gini co-effecient at .67 and rising) and a Communist Party that can’t keep the lid on things as it all unravels?

  11. At least purchases of new apartments builds by foreign investors has a reasonably high Australian labour content, so it is like exporting a Mercedes (or a Bentley for top of the line apartments) and selling a block of undeveloped land to the same person.

    There is Australian labour in all the design, planning survey, kerbing, drainage, approvals process, sand and gravel quarrying, concrete manufacture, oncrete delivery, formwork, scaffolding, crane erection, concrete pouring, painting, kitchen cupboard manufacture, kitchen installation, tiling, etc…

    Sure there are some imported appliances and fittings, furniture and furnishings, but also some Australian ones.

    My understanding is that most offshhore buying tends to be new apartment builds.

    It is even better tht they do it while there is a high AUD as that means we are maximising the pruchasing power of the Australians involved in the materials and construction etc.

  12. I have a easy solution, if you know of a house that has been bought by a non resident, move in change and change locks.

    They do not have a legal leg to stand on to evict you. You now own your own house!

    • Maybe if the house is fully paid. If not and the mortgage stops being paid is the bank that will invite you out. Even if is fully paid someone may come in while you are not there and change the locks. What are you going to do? Call the cops?
      That’s not a solution.
      FIRB could have been but I’m sure they don’t want to be! “FIRB does not conduct unsolicited audits or checking of existing dwelling sales for compliance” …. why not? This police state knows how to go around and check parking spots, smoking on prohibited places like beaches and sport venues you name it. Of course if is a direct complain then let’s pretend we enforce it. Is all a big bullshit as far as I’m concerned.

  13. Leith,

    The focus on urban consolidation policies misses the point. The demand for housing is near the centre where there is amenity, proximity to jobs and FUN. The sprawl model has an intractable issue with congestion (witness Western Sydney) and is not FUN (ask anyone who has lived in Houston).

    The real answer is to free up land use near the city. The nicest urban areas in the world (eg West London, San Francisco, Brooklyn) tend to be 3-6 stories, about 6000 people per square kilometre. Yet the suburb I live in still has blocks of 19th century 1 story cottages because of crazy land use regs.

    These crazy laws are driven by a few thousand generally older, land-owning NIMBYs. These NIMBYs are effectively looting our society, because they are trying to fabricate a property right that does not really exist (within any conceivable social contract), i.e. the right to stop others improving their land. They can do so because they operate out of sight of the people whose lives they ruin (e.g. first home buyers).

    Note that if development in the inner suburbs is ramped up, Chinese buying ceases to be an issue – we can manufacture all the housing they can buy, even if it remains vacant for years. We have enough building materials.

    • My focus is on freeing-up planning all over (see here). But what you need to recognise is that if the Government restricts growth on the fringe, forcing-up land/house prices, it also forces-up prices throughout the entire urban area (including the inner city). This makes in-fill development more expensive too.

      You are also incorrect about sprawl = congestion. This is nonsensical. You have wrongly presumed that most people work and commute into the CBD, when only a small minority do. You also seem to think that cramming more people into a limited space will somehow reduce congestion and commute times. It won’t. There are countless examples throughout the world where decentralised (sprawling cities) have lower commute times than consolidated cities [e.g. average commute times in “sprawling” Texas are below the US national average].

      Besides, if you are so sure that everyone wants to live in the CBD, then why have growth constraints in place at all? Surely market preferences will direct development to the inner city and regulation will therefore not be required?

      What I propose is greater housing choice, whereby people live where they prefer, rather than where planners dictate. This requires free-up planning all over.

      • We just need to build several Adelaide sized cities along the Nullarbor Plain, etc. We may as well convert some of the deserts to green land!

        I am pretty certain that that will be more than enough to pick up the slack left by the coming CAPEX cliff.

        For longer term, we will need a measure to increase competition among different states so that they try to attract population and capital by coming up with new ideas to incentivize relocation.

        I know, this is not America and we do not have that kind of DNA – only mateship and oligopoly. I am just saying, rather uncharacteristically, what should be done rather than what will be done.

      • The debate about whether sprawl will cause congestion or not is unnecessary – the congestion is already there. The question is what to do about it. By all means let new developments on the outskirts be part of the solution – just let it be fully costed. Once the cost of new motorways, trains and water, is taken into account, the new developments will gravitate towards an appropriate density.

      • I am sorry UE but I really struggle with your views

        Explain to me using Melbourne or Sydney how freeing up land on the outskirts will somehow reduce the cost of housing in the inner suburbs

        I’m from Melbourne, median house price in my area is $900k, houses on the fringe sell for $350k, so you flood the market with land past Berwick for $50k a lot and sell it to anyone that wants it

        I can guarantee you it won’t make one iota of difference to demand or prices in my area as they looking to buy here have zero interest in the outskirts, the demand for housing here keeps increasing due to schools and transport and a significant influx of Chinese looking to buy in the area

        Your idea sounds good in theory but you haven’t actually reduced any demand from the inner suburbs and people will continue to pay top dollar to live in the inner east of melbourne

        • Excellent OMG ( and Mr Turnitup)

          ” can guarantee you it won’t make one iota of difference to demand or prices in my area..’

          Often some resist supply expansion as they fear it may impact their IP portfolio.

          Accordingly, you will have no objection to increased low cost supply on the outskirts.

          Marvellous that we are all getting on the same page.

          • Increased low cost housing is essential, I don’t think there’s a sane person in Australia who would argue against that. The point OMG made is that as far as house prices in desirable locations is concerned, it matters little what happens in Timbuktu. Property portfolio? Tell you what, I wish like blazers I was born 30 years earlier. Then I could get my grubby paws on some of this ‘dirty filthy communist treacherous mafioso corrupt laundered criminal’ money.

          • “.. Tell you what, I wish like blazers I was born 30 years earlier. Then I could get my grubby paws on some of this ‘dirty filthy communist treacherous mafioso corrupt laundered criminal’ money…”

            Don’t fret !

            The best things in life are free!

            But I suppose you would give them to the birds and bees.

      • Two observations:
        Over the last two months there appears to be a significant increase in articles / discussions concerning housing availability issues in the popular press ( except Murdoch )in veins as expressed here. Not before time. I ascribe much of this focus to Leigh’s efforts over the last two years. He should be rightly proud. there is no bigger issue facing this country.
        There is often a thread here of BB remorse ( justified or not ). Ultimately change is not affected by evidence and well reasoned argument. The “enemy” already know the situation; and like it just fine thanks. The anti Vietnam War protests and accompanied student radicalism are not urban myths. They possible didn’t change the world, but people sure noticed. The army of those currently disaffected needs mobilizing, there are adequate numbers but are much more conservative and have hither too lacked knowledge and leadership. Perhaps a site – “Cynical FHB’s” specifically on housing is an answer.

    • “Note that if development in the inner suburbs is ramped up, Chinese buying ceases to be an issue”

      I think you are underestimating the growth in the number and wealth of the global super-rich and merely-rich, as well as their desire for trophy homes in global cities. London has seen massive price growth in desirable areas like Westminster, Kensington and Chelsea (50% up on 2007) with price spillover into surrounding locales, virtually all of it foreign money. This is happening in parts of Melbourne and Sydney right now. Foreign investment is a significant driver of prices for prime real estate in globally desirable cities. Due to changes to our FIRB rules in 2007/8, Australia is no exception.

      Having said that, I agree totally with UE about the need to free up planning all over our metropolis. We have big problems on both the demand and the supply side.

      • Exactly, the world is awash with easy money, the emerging world in particular tends to be marked by dubious financial management systems, febrile political arrangements, almost ubiquitous corruption, and a pervasive desire by anyone with access to wealth to make sure they can be outside that nation at a moments notice..

        In particular Australian markets it is a significant factor.

        That said if there are no constraints on residential development, and suitable infrastructure is put in place, then Australia, of all nations, should have plenty of room.

          • Yeah, no worries, I buy the concept that we arent going to domicile zillions, but we can handle more than we have (provided it is done properly with infrastructure – and isnt just used as a tap to keep the RE demand bathtub full) – that was my general idea.

            All the more reason to clearly identify the carrying capacity of the nation and work out what may constitute the ‘right’ population we should be aiming at (as well as what they would be doing) rather than just run the taps without thinking about it. But population policy seems to rank up there with real estate bubble/market distortion examination policy as something we arent allowed to consider here.

  14. +1 UE

    I stated this before, but I will repeat.

    When the Chinese bought up all the minerals from iron ore to coal, and caused the mining boom, BHP, RIO, FMG and the like, happily invested to increase supply. Maybe my memory is fading, but I cannot recall anybody here complaining about it.

    Somehow, when the same Chinese did essentially the same thing to the residential properties, it is suddenly a big problem. The solution is obvious – just do the same as what the mining companies did – plain & simple.

    By examining what is preventing that solution – the problem is also obvious. End of story.

    • Chineses do not buy existing houses (or new apt) in the middle of nowhere, far from infrastructure/jobs/kindies, they buy in desirable location, close to cbd, close to good school, close to infrastructure.You cannot increase much this particular supply, it s quite inelastic.

        • you re right, the Australians have cars, they can drive 45min to get to the kindy/maternity.The premium to paid to get to live close to infrastructures/jobs/culture/schools/hospital is going to get ridiculous with this additional 1 million more inhabitant every 3-4 years + foreign investments (even if the fringe get cheaper in the unlikely event of increased supply)

          • Yep, we’re heading for (or perhaps have already arrived at) a two-tier Australia. There are suburbs in Melbourne and Sydney, at opposite ends of the spectrum, that have absolutely nothing in common with one another and may as well be on opposite sides of the earth

          • If you think tiers in suburbia is a new thing you have been asleep for a long time.

            Having said that most of my PA’s over the years have looked at me like I have lost my mind when I suggest they move closer to the city.

            You are looking at the world through Brighton tinted glasses.

          • Most of those PAs now own their homes outright so they knew what they were on about.

            It is all those young professionals flocking like bogon moths to the smouldering candles of hipster cafes who are gasping.

  15. Why can’t the federal and State government introduce rulings that restricts foreigners to purchase properties that are built 6 storeys high and above or condominiums? Only after they become Australian citizens can they be permitted to buy landed properties.
    I believe Singapore used to have such ruling and it protects their citizens from overseas speculators. When that rule was removed, prices of private properties soared through the roofs. Today, locals can’t afford to buy them at all. Those who do are borrowing from several banks to make ends meet.

  16. Supply will NOT fix the problem! as deep pocket overseas buyer currently snaps top quality location while locals will be pushed to outskirts with no infrastructure

    • I agree 100%, extra supply will just be preferrentially sold straight to the foreign investor, the local Australian, especially FHB will be left out in the cold.

      • I’d be a bit careful rushing in with pronouncements that Chinese this, Chinese that etc. based on anecdotal evidence, same went on in early 1930’s Germany (just to make sure they were divested of all property and assets).

        Sure many Chinese (from PRC? HK? Taiwan? Malaysia? or maybe even Oz citizens/permanent residents) would be buying apts., that are supposedly not suitable for Oz ‘culture’, in addition to suburban homes.

        How many other foreigners do the same but in general, what if the question was framed as ‘how many (white) Southern African, Irish, British, European etc. temporaries and non residents are buying real estate with foreign funds in Australia?

        Further, if it’s true, why does Melbourne still have near record levels of stock on market (acording to SQM)?

        Nonetheless, scrapping NG and introducing land tax plus measures to ensure properties are used could be logical, but many vested interests including SMSFs, etc. are happy to keep the status quo (while diverting attention).