Who is property’s “Chinese buyer”?

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The AFR has a story today that underlines a growing problem in property nomenclature:

A Chinese buyer has paid more than $10 million for a waterfront home on Sydney’s North Shore, making it one of Mosman’s highest prices for the year.

Chinese buyers will drive Sydney’s prestige property market in 2014, selling agent and Belle Property principal Tim Foote said.

“About 30 to 40 per cent of Mosman sales above $3 million this year have been to Chinese buyers,” he said.

…“We had three offers. The other two were from another Chinese buyer and a local family,” Mr Foote said. The buyers, who have Australian residency, own an industrial business based in mainland China and Hong Kong.

So then, is this buyer “Chinese’? As an Australian resident they are surely at least part Aussie? Or is the definition cutoff being a citizen? It certainly is not ethnicity.

As the “Chodley Wontok” experiment showed, there are large holes in the FIRB barrier to foreign investment in Australian property. However, I find it hard to believe that many foreign buyers of property are doing so illegally. The risks surely outweigh the gains.

As we know as well, the vast bulk of Chinese investment in Australian real estate goes into new properties, which add to supply and will likely keep prices down over time. For instance, Melbourne’s inner ghost cities of Docklands and Southbank are playing a role in preventing it from following the Sydney mania skywards.

As the “Chinese buyer” increasingly becomes a scapegoat for our own elite’s dreadful policy-making, we should all be clear about exactly what and who we are referring to.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

    • Strange Economics

      Yes, but there is also plenty of comments on how the Australian/Chinese citizens (assuming if the Real Estate agents do check at all) are asked to buy several properties here, with the money from china (which also has lower interest rate, off bank loans).
      Or students who buy $ 1 million houses?

      Coupled with Australias zero capital gains on private residences a $ 2 million dollar house is no problem and looks pretty good. Unfortunately bidding these up bids up the market all the way down.
      And far more secure than a Shanghai property investment.
      Or investment here and get negative gearing – (only in the top 20 economies – Australia is higher income welfare this good and lower income welfare so bad).

      • +1

        I cannot for the life of me imagine a situation where a RE has someone in front of him/her looking to spend money, and prefacing the negotiation with a request to prove or check the legitimacy of their right to purchase. The RE dont want a bar of having to do that. I would be shocked if it even occurred to them to do that. Unless there is a well published requirement that they are remind of again and again followed by highly publicized prosecutions and delisting for those that dont it will never happen.

    • Boo hoo. Aussies are now complaining about “foreigners”.Australians don’t seem to mind when they goto say, Thailand and snap up all the nightclubs and beach houses there. Australians have one of the highest incomes in the world, yet all of you here are complaining about the rich “Asian” Chinese who are buying Australian real estate. These people make up less than a few percentages of the Australian real estate market. Most ethnics still get poorly treated by employers. Racism is still strong in Australia. When was the last time an Australia TV show was headed by an Asian actor? Never. Several recruiters have told me that if they see an Indian, Asian or Arab resume, they will simply throw it in the bin. Think I’m lying? Go over to the whirlpool forums and look at some of the recruiters threads. Its a good thing our great political leaders are smarter than that and are looking into the future.

  1. ‘However, I find it hard to believe that many foreign buyers of property are doing so illegally. The risks surely outweigh the gains’

    A few that I know have an absolute pigheadedness when it comes to the law and their ability to pay someone off to get away with an infraction. Ignoring road rules, especially speed are another frustrating example. You have to wonder if this is the lesser of two risks compared to leaving dirty money at home. It says much about life and conditions in China.

    • Your post is a joke. Chinese drivers speeding!!! I have never seen this. Usually they are in the right lane driving 20km under the limit with their windscreen wipers going on a hot summers day.

      • Absolutely Lab, don’t forget the indicators flashing and licences that came straight out of a box of cornflakes, for a price of course.

        These are younger generation guys, students, who belong to widget producing business owners and casino operators from Macau. They have blank cheques and think nothing of blowing $150K on a night at the casino. You’d be amazed how many there are. There’s a whole chaperone industry that’s developed just to look after them before they turn 18. They think they’re invincible and untouchable, because where they come from they practically are. I suspect the majority of Asian investors we’re seeing here paying cash for property aren’t your average Chinese middle class.

  2. The real issue is Chinese money. That might be via foreign investment, migrants or migrants and students buying on behalf of family back home. Let’s not understate the tragedy that has unfolded here. Aussies can no longer compete with foreign money. All foreign investment must be stopped now. Immigration must be massively reduced. All purchases going forward must provide evidence of eligibility

    • Yes. But the critical thing is not where the money comes from – US, China and Europe all have very loose monetary policy – it is getting our heads around it and insulating our important social assets, like housing, from the damage.

      There is now no doubt that the Fed (and RBA) policies are resulting in a net shift of wealth from the poor and middle to the very wealthy. The backlash is predictably manifesting itself as xenophobia.

    • The real ‘tragedy’ has been caused by the malign forces of upper middle class elitist planning snobbery and property interests who have engineered a shortage of land with permission to build upon in one of the least densely populated countries in the world.

      If the price of land reverted to the long term mean before the growth boundaries were imposed, ‘Chinese money’ or anyone else’s hot cash would not be an issue.

      Fix that issue and the who gives a 4X, it’s foreign investment and should be welcomed.

    • “That might be via foreign investment, migrants or migrants and students buying on behalf of family back home.”

      EXACTLY! Australians who are priced out of home ownership don’t care whether they were outbid by Chinese nationals or immigrants. The fact is that Chinese people are bidding up prices, and their presence is being noticed on an increasing scale. When you consider the size of China’s population and their increasing wealth, and their eagerness to buy up Australian real estate, it really is a frightening prospect.

      Now, I’m not against Chinese people individually. I’ve met lot of Chinese people over the years and they’ve all been very nice and friendly. My problem is that they are distorting the property market and locking out would-be Australian homebuyers.

      I am not even blaming the Chinese for doing this – it is entirely the fault of the government who is allowing this practice to take place on a daily basis. The government has turned its back on Australians in favour of anything that keeps the bubble going.

      There are of course, other nationalities also buying Australian real estate but the Chinese are more noticeable, not only by their looks but by their sheer numbers. I guess it’s unfortunate for people of Chinese origin who have been here for generations – they are going to be lumped in with Chinese who have just stepped off the plane, but again, it is the fault of the government who has created this atmosphere of suspicion and disappointment when would-be home buyers are constantly outbid by people who look Chinese.

  3. Chinese overnight interbank lending still an issue, I’d love to know what collateral is being posted for these properties because it sounds like a lot of the liquidity that is going around in China are just post-dated checks drawn on no one but endorsed by bank and used as a negotiable instrument — basically confetti. If the property is not bought outright with cash how will Australian institutions chase non-performing loans?

    • And as has been repeated ad nauseam, this manifests itself as a massive capital risk for our banks – all the models assume the leverage ratios are safe, but the valuations are stretched on the back of phantom capital.

      This will blow up, and the mess will be immense. Owning ones home, debt free, has always been an excellent buffer to the storms of global finance and world politics. That our government is feeding a system that inherently will increase our inability to cope with a shock is quite remiss.

    • That is the reason why projects funded by banks have a ceiling of 20% Off the plan sale to overseas investors.

      Having said that, that risk does not trouble billionaire developers like HRH Triguboff, who have their own funding. Since High Rise Harry is Chinese born, maybe he has contacts in China to track down buyers and make them pay voluntarily 😉

      • Speaking of HRH, he is currently charging only $94 pn for a room in his brand spanking new 85flr Infinity tower in the Bris CBD, if anyone needs cheap accom in Bris.
        Disclosure: I received no fee for this community service announcement although Harry, if you are reading this, you know where to find me.

  4. Whilst we fret about the US printing $85b a month, the Chinese are magically printing 200b a month!

    So here we go, Celente says this will only end one way.

    Trade war
    Currency war
    World war

    So a country can simply goose it’s economy, load/arm it’s natition up with fiat money and deploy them into other countries to conduct conquest by cash.

    We allow it because we are greedy and “stoopid”. Don’t confuse this behavior with foreign investment with mutually beneficial outcomes.

  5. Amen H&H.

    I’m not sure Southbank and Docklands could be referred to as ghost cities though. I thought I read their vacancy rates were around 7%. Far from healthy, but even further from a ghost city. Happy to be corrected on those numbers. Although Docklands is a ghost city in the sense that is has no feeling or soul, perhaps that’s what you meant. I still worry that nuffy Aussies could turn their anger and resentment at their own crappy lives towards Chinese, but I know I made my point about that the other day. But I appreciate the tone of your post.

  6. Nick the GreekMEMBER

    From my experience in Singapore, the Singaporeans (who I believe are the 2nd biggest foreign investors in Australian property behind the Chinese) are mostly buying new build property. But I know several who use family connections in Australia to invest in established property.

    The biggest difference between the Chinese and Singaporean investor is that the Singaporeans are looking to make a return via rental income and capital growth, while the Chinese are just looking to get their money offshore and keep it offshore.

    • That pretty much nails it. The Chinese abroad have very few avenues for investing their surplus cash (and being net savers, there’s plenty)
      Just off the top of my head – problems that Chinese have with investing in their own country:
      1) Cash deposits: under market interest rates, used to cross subsidise state investment in uneconomic infrastructure projects.
      2) Equities/stock markets: not in a communist country. That’s just plain silly.
      3) Housing: hot soup bubbly prices for ghost towns
      4) Bonds/debt: near non-existent market (I hear Shanghai has bonds, but it’s not a realistic investment vehicle for the masses).

      No wonder Chinese money is heading offshore – they’ve got no other option.

      • Politicians love it, because it makes the accounts looks good (i.e. GDP and foreign investment is up! we did that!).

        The only reasons why I’m skeptical of Chinese capital is that:
        1) lack of transparency between who is the State vs. the individual,
        2) the lack of clear rationale for investing in certain asset clases (i.e. less a profit motive, and more a savings vehicle, which sees money cluster in seemingly odd places), and;
        3) the sheer amount of surplus Chinese capital is mind boggling. Neither points 1 or 2 would matter too much if this money werent such a fundamental game changer on the economies it touches.

        Is Chinese capital a good/bad thing? no idea… There are a plethora of industries that could thrive on an injection of Chinese capital… (established housing is not one of them.. dairy production, maybe)
        My point though, is to tread lightly.

  7. Sloppiness in MSM nomenclature and MSM analysis generally is expected. We all come here to get something more.

    But it is wrong to blame the MSM on this occassion.

    The above (in part) is the manifestation public uncertainty born of FIRB regulatory failure.

    Maybe there are no illegal foreign purchases of existing dwellings. The problem is we don’t know.

    You say “the risks outweigh the gains” but what is the risk of discovery?
    Name one prosecution by the FIRB for failure to get FIRB approval for the purchase of an existing dwelling.
    Name when and where an audit of purchases of existing dwellings has been conducted. Anywhere.

    There is nothing stopping the illegal purchase of an existing dwelling by a foreign national. Nothing.

    ..and there is no audit process to give the public confidence that the law is being enforced.

    A law without enforcement (and perceived enforcement) is no law at all.

    We should not be surprised that there are growing public concerns where the perception is non-enforcement.

    The FIRB has the ability to change this perception today.

  8. Think this issue is a mix of the following:

    – Our ridiculous planning and policy matrix that has turned shelter into a financial plaything, causing panic for those who are not already in on the game. This is basically everybody born after 1975 (and a decent portion of those born 1970-1975), so a growing cohort, but currently only around a third of households. For those in the cohort with rich parents, they have a way out, but it’s pretty undignified and socially extremely regressive.

    – There is a perception that the “authorities” put their own and the interests of the two-thirds of households that are in the game ahead of that one-third of households that is not in the game. What a surprise! In a happy coincidence, politicians can go for votes at the same time as protecting their own assets. Who would stand up for the dispossessed one-third? This compounds the feelings of hopelessness, resentment and unfairness.

    – Instead of there being any real and widespread recognition of the plight of the 33%, they are continuously told that they are in fact feckless wastrels, the authors of their own misery, who need to just pawn the iPad, cut the lattes and go to live in Emu Plains for 10 years “like the rest of us did”. Cough, cough.

    – There is no reliable information about the amount of foreign money that is coming into the market and the “authorities” appear very unmotivated (at best) to supply that information. Rumour races in to fill the vacuum and foreigners are the target. This is a pretty common phenomenon in times of national stress (which this housing situation is fast becoming – witness the recent capitulation of FHBs), often resulting in pogroms (see section 3 of this: http://en.wikipedia.org/wiki/1923_Great_Kant%C5%8D_earthquake). By contrast, the strangled whining on comment forums is pretty tame, so far…

    – It is well known that there is a lot of dirty money gushing out of China and our government appears determined to hoover up as much of it as possible. Add to this the Chodley Wontok factor (not that there’s a huge appreciation of this in the wider populace, I’d say) and it’s not such a big step to a conspiracy theory from there.

    – Fundamentally there is very little understanding of China in Australia. Again, rumour/speculation races in to fill the vacuum, making them seem all powerful, just like the Soviets did … until they didn’t.

    What’s the answer? I think it has to be information. Let’s have it and move on – either to tighten regulations or to realise that the Chinese money thing is a load of baloney.

    The slight concern I have is that I can’t really see any way of stopping somebody determined to park dirty money in Aussie property. There are simply too many ways of getting around the restrictions. So ultimately, it comes back to the “financial plaything” issue. This won’t change until we have our crash.

    • Fantastic synopsis McPaddy. The issue is truly that the motivation to do nothing far outweighs the motivation for rational housing policy. To be continued in the new year no doubt.

    • The 33% that don’t own houses. Does it include very young households? Does the ownership rate change at 35+ years. What is it at 60 years? Has it been undermined by people marrying later?

      With the aging of the population, should the home ownership rate be expected now to gradually creep up?

      • Sadly, I think not, Explorer.

        The issue for the 33% is that by the time they had an income sufficient to start thinking about signing up for a house, the market had become a more or less closed loop. The only ways to enter without using equity that had been magicked up by a rising market were:
        – a friendly loan or gift from others who were part of the 66% (ie. parents); or
        – a life of extreme sacrifice, unpalatable to most, and far beyond what is rational or previous generations had been prepared to accept

        Those without the convenience of rich parents or a masochistic bent have watched in impotent rage as their dreams of their Aussie “birthright” evaporate while their “elders and betters” (aided and abetted by the disingenuous and hopelessly compromised MSM) scold them and make off like bandits, or have realised their “mistake” and signed up for the hamster wheel.

        But fundamentally the game is getting harder for new entrants, regardless of their age, hence the plunging FHB cohort. Can’t be long before we see first home vendors’ grants back on the agenda. It’s the only way for the 66% to keep the perpetual motion machine running.

    • Nailed it McPaddy

      Ultimately it is not a problem with Chinese buyers so much as our own administrative and planning processes.

      I think Leith’s unlock the land point is probably the one to push. But the net result at the moment is that if you cruise parts of the inner city apartment land after dark it is pretty noticeable that there are lots and lots of unused apartments.

    • +1 McPaddy

      I cannot see immediate answer either, other than to increase supply, which they obviously do not want to.

  9. USGG10YR 2.94% up 50bps from yesterday. No taper won’t have any effect on yields! Time to twist again

  10. Julia Gillard’s Altona house was sold to “Chinese” buyers (for an absurdly high sale price).. But to avoid getting some knickers in a twist, the reporter was careful to point out the buyers are Aussie citizens. 🙂

    • Kabuki is fun until the masks come off 🙂

      As for buying the house owned by Australias first female Prime Minister? Probably a good collectors item…

    • It will be interesting to see whether there’s any ripple effect throughout the Chinese community, attracting more to the area. That purchase was 250-300K above ‘real’ value. Will they now look upon the suburb as being the place where national leaders live? One thing’s for sure they won’t buy there for good schools. There aren’t any.

    • My understanding of that is that the Chinese buyers, aware of an increasing suspicion about whether ‘Chinese’ buyers are Australian citizens or visa holders, or whether they are citizens of the Peoples Republic who simply want to buy something in Australia, made an especial point of highlighting that they are legitimate buyers of Australian real estate.

      I didnt find the desire to highlight the legitimacy particularly surprising. I have had ‘Chinese’ Australians (or legit visa holders) tell me straight out that there is a major problem with ‘Chinese’ buyers and money coming straight out from China and not doing so legitimately, and express genuine surprise that FIRB (as seen quite clearly from the Chodley Wontok incident) and the government (both sides) are simply not interested in looking at the issue.

      • As any resident of Chinese heritage, they will tell you the last people you should allow to buy property is Chinese nationals from China. The damage they have done in China with their hording mentality and ultra-competitive nature, it is the last thing we would want to import here.

      • I have previously mentioned a friend of mine who deals real estate exclusively with Chinese nationals. Whenever a new apartment block is up for sale in and around Haymarket (Sydney), bus loads of Chinese nationals turn up for a reverse auction. All of the apartments are sold within a day to Chinese nationals.

      • General Disarray

        Good point, Gunna.

        I’m more interested in where the money came from than the nationality of the buyers. They can scream Australian until blue in the face but that doesn’t mean much if they’re bringing in loads of funny money from international interests.

      • If its 33% as suggested then that 33% and the sizable other supporters need to get on the senate ticket. 3 senators are a game changer here.

        The other real protest option although a little late now but a ‘beudy’ at AUD 1.07 USD was to buy gold with your FHB deposit deny the banks on mass and scare the hell out of Cap’tn Glenn to boot.

        I have run out of sympathy for those who can only moan about their situation.

        Thanks TD

      • GunnamattaMEMBER

        General Disarray

        Thats the point, and it is about there that this whole issues comes back into the loop with the intermittent corruption threads we see about the RBA or subsidiaries engaging in dodgy behaviour.

        A student in Australia is here legitimately, and that student can buy an Australia residence quite legitimately.

        How they fund that is the question. Anecdotally there is lots to suggest that others in China (family friends and the like) send them the dough. All ostensible enough.

        If you suspect there are issues with the wealth acquisition process in China then the whole point comes back to the veracity of the funds and if anyone ever asks about it – in Australia we dont currently, but we have done in the recent past.

        My understanding is that very little of the wealth coming out of China would stand up well to scrutiny of the how has it been accrued, how has it been accounted for, and what documentary trace does it have type.

        The issue ultimately comes to a head when some reforming type gets hold in China and establishes a register of foreign assets – similar to what the Russians have done for their politicians – and then starts to join the dots to relatives and friends outside the country. The sensitivity of the Chinese to recent reports in Bloomberg and the New York Times pretty clearly shows their sensitivity to the issue.

        I am certainly not any form of expert on China, but know an awful lot about Russia and Central Asia, and am reliably told the wealth acquisition process in China is about as corrupt as there. If that were true I would suggest imposing a documentary trace requirement on all funds sent to Australia, and/or establishing a foreign ownership of real estate assets register, and getting immigration types (and I am told that Australian immigration types have already made this point known) to effectively monitor who is buying what and the veracity of the funds involved may unveil some real uglies.

        There are also a load of other implications – which the Australian migration types would be all too quick to identify for those applying for immigration from Russia but wouldnt (it seems) ask in a million years of anyone from China.

  11. As with my earlier posts, the issue may not be that these are being bought illegally as these buyers can easily find a legal way of purchasing.

    As I’ve seen with friends that have come here to study from the mainland there appears to be an unlimited supply of cash available and each has bought one, two or three houses since moving here thanks to money from their parents

    The point I’m trying to make is that it will be increasingly difficult for those that have lived here for some time to buy a house and fhb’s will need to look further out

    Also, these friends have bought in some well to do areas, and houses on good size blocks that they aim to develop

    • = 100 OMG.

      The ALP made significant changes to the rules regarding foreign investment of residential RE in late 2008. To recap on the one OMG describes, it used to be that a foreign student living in oz under a temporary residence visa could legally buy one (emphasize ONE) existing, established property to live in whilst studying here. There was a maximum allowable spend of $300,000. Invariably they bought a small unit.
      The rule change now allows temporary resident visa holders (ie: non permanent residents) to buy unlimited amounts of established homes with zero restrictions on price.
      And that is exactly what has been happening. The new global rich and merely rich have an almost fully open door to pick up Australian Residential Real Estate. Legally. FIRB knows exactly what’s going on. So does the Government.

    • Yep, this hoarding of property – new or established – in this case via almost endless funds from overseas, is currently not illegal in any way if the purchaser is a permanent resident. And they can forego any competition in the purchase by putting in exceptional high bids that few others can compete with, almost ad infinitum. In these cases it may have little to do with investment and much to do with hedging political risk in their own country and an escape plan.

      To jump the “Chinese” issue, is this hoarding of a social good – Housing – by ANYONE in our society a good thing or something that should possibly be stamped down? A fairly recent article on here showed the number of multi-dwelling owners in Australia, where the number of people owning 8 or more properties was over 100,000, with obviously a lot more owning fewer multiple dwellings. Regardless of these owners’ citizenship and place of birth, is such hoarding a desirable outcome for society?

      If this is the general issue that most people seem to have in this regard, why isn’t the simple concept of restricting non-owner occupied property purchases for any established properties raised at all? Ie. Any citizen can only have a limited number of properties with non-owner occupiers restricted to purchasing new developments/releases only. Sure taxation needs to be addressed, but this could be a whole lot simpler in intent and policing.

      In the current global course of the Haves vs the Have-nots, this situation will come about one way or another.

  12. From the auctions I have attended in Doncaster, Balwyn & Box Hill, and in discussing their finances on a personal level, the legit ‘Chinese’ purchaser is generally a 20-something yr old student turned AU resident, being sent a small fortune from parents back home.

    Take my mother’s neighbour for example; 24yrs old – own property in Doncaster, Camberwell, Canterbury…along with a cafe @ Docklands.

    Nothing will be done to stop the pattern…. what will the RE landscape look like in AU in 10 years?

    • “what will the RE landscape look like in AU in 10 years?”

      As you look out the small window of of your cramped 1 bedroom appartment that costs you 3/4 of your income to rent you will pay homage to the political ancestors of this once great nation who sold you out and made you a second class citizen. You can relax on your yellow stained 10 year old couch and bask in the knowledge that those same politicians are now earning millions being appointed to the boards of corporate Australia, spending their evenings on the ocean being hosted in the palatial yachts of the rent seeking wealthy class, schmoozing and having cocktails with the wealthy foriengers that have purchased your birth right out from under you.

    • Bing WaltK

      What will the lanscape look like?

      The non Chinese will always have Pakenham and Cranbourne

      http://theage.domain.com.au/real-estate-news/chinese-buyers-in-rush-for-melbournes-prestige-school-zones-20131219-2zmbn.html

      This article spells things out, population of Chinese born in Balwyn doubled between 2006 and 2011. These figures are now way out of date and I wouldn’t be suprised if they have doubled again in the last two years alone

      Called LJ Hooker in Glen Waverley to enquire about a property, no return call from the agent after three days, GF called (has an asian surname).. return call in 30 minutes

    • I am not supportive of what has happened to Chinese minorities in SE Asia from time to time but history is what it is and the purges are possible here too. Other discrimination may result including very restrictive ownership laws access to govt jobs etc.

      The game being played by all sides is one of the utmost stakes, peoples ‘families’. Australians like any other nationality will d what ever is necessary to protect their children.

      There will be a nasty consequence should this trend of disenfranchising a large group of Australians continue.

  13. Even if Chinese buyers are buying new properties, where is the benefit to locals? Australians are being discriminated against by developers as they pursue foreign investors exclusively, new developments are then effectively shut-out to locals by price and marketing.

    Supply is meaningless if it just gets sold onto an unlimited pool of demand external to the actual people that need it.

    • Aussie residents rent these properties @ 50% of the cost of owning which frees up supply else where.

      I see it as a win win.

    • The point you make Powermonger is key. Extra supply is useless for the local market if it is designed, appointed and (more importantly) priced and marketed to an exclusively foreign clientele.
      Again, one of overlooked changes to the FIRB rules in 2008 was permission for developers to sell 100% of new builds direct to customers overseas. For decades prior the maximum allowable was 50% of the units (in any new development). The rest HAD to be sold to locals.

      • The commercial reality is that if the developer is selling it overseas it is because the stock is too expensive and if sold at high prices to locals valuers would decimate them come time for settlement. Cash buyers from overseas dont have this problem.

        Without Chinese Buyers the building would not get built, all those workers wouldn’t get employed and it would be a net loss to the economy.

  14. As the “Chinese buyer” increasingly becomes a scapegoat for our own elite’s dreadful policy-making, we should all be clear about exactly what and who we are referring to.

    Hear Hear.

    The problem with narratives is that they seem to have their own inherent truth (based on simple clues like appearance), but they are a contrivance. Telling the story of hot money crowding out FHB’s is a lot easier to pitch than illustrating how complicated tax, planning and financial issues are the real antagonist.

    • +1 As we know RE media narratives and promotion is about creating idea of a hot market, get in now…..

      Slippery slope when all the supposed evidence re. Chinese is mostly anecdotal with confusion and conflation of status between who is a citizen, permanent resident or temporary resident when the latter are referred to as ‘immigrants’ (which suggests permanent immigrant which they are not).

    • Exactly, felix.

      Timely for……

      Episode 28 REPLAY

      Disclaimer: All characters and events in this Episode -–even those based on real people–-are entirely fictional. All celebrity voices are impersonated…..poorly. The following Episode contains coarse language and due to its content it should not be viewed by anyone.

      Not so long ago in a galaxy not so far away……

      Darth Housing Complex: The local demand from FHBs has been in terminal decline. Can you cut rates again to reel them in?

      Darth RBA-ASIC-Banking Complex: I can, but that alone would not be enough.

      Darth Housing Complex: I need your help soon or the Emperor in the Wall Street will deep-fry me with his Force lightening. This is desperate time. How about bending the rules of the FIRB to fill the growing holes in the demand? Perhaps you can publicly crap the lines of “We need higher prices to encourage building activities”. I am sure that they are dumb enough to buy that line.

      Darth RBA-ASIC-Banking Complex: I can bridge the gap by temporarily cutting rates by 25bps until Lord FIRB can supply a sufficient number of greater fools from China to keep our housing demand boiling.

      Darth FIRB: I can play the game but you must first make sure that nobody can find out that the rules are being bent.

      Darth RBA-ASIC-Banking Complex: Leave that to me. I am good at delaying cases until the statute of limitations is reached.

      Darth FIRB: Your impeccable handling of the recent NTA / Securency scandal is indeed reassuring.

      Darth Housing Complex: So, Lord FIRB will secretly bend the rules and supply me with greater fools from China. You can be darn sure that I will waste no time to chain them to the debt slavery for the rest of their lives. They are meant to exist for the sole purpose of serving us anyway……. Lord RBA-ASIC-Banking Complex will provide cover for Lord FIRB in case somebody smells a rat, and I will launch a new ads blitz with patriotic spin on it to reel in the stubborn locals who are slow to learn that it is futile to resist…. How about “Buy now or you will forever miss out to the filthy rich Chinese! Don’t sell our precious land to foreigners”?

      Darth FIRB: Brilliant! If something goes wrong, local hotheads will go straight after them, not us.

      Darth RBA-ASIC-Banking Complex: The resulting riots will provide us with a one-in-a-million opportunity to introduce martial law with strict curfew.

      Darth Housing Complex: Your divine foresight is truly impressive. We can then instruct the AFP to shoot whoever violates the curfew first and ask questions later. That will clean up our cities quite a bit – they are getting a bit too crowded these days anyway. The homeowners will have spent so much money for their houses by then, they’d better spend a lot of time inside their cherished investments while we keep squeezing them long and hard. Mwahahahahaha.

      Darth RBA-ASIC-Banking Complex: Don’t let them live, but don’t kill them either. We will need steady income streams from them for a looooooong time to fund our comfortable retirement.

      Darth Housing Complex: As you wish.

  15. +1 HnH, pretty much summarizes what I have been stating all along.

    BTW, I like your expression of “Melbourne’s inner ghost cities of Docklands and Southbank”.

    Wait,…. no, in fact, I love it.

  16. PERTH
    Why chinese not investing in Perth market, lots of apartments in city up for sale but not selling and
    houses above 1million not selling fast.

    • I dont have any documented evidence to contradict your claim. All i can tell you with conversations and personal observations is, that this is not the case. There is plenty of demand and plenty of purchases taking place in perth by a demographic describe genericly as chinese speaking buyers.

      Could you please share your experiences.

      • Correct, rents are way down compared to 2011 and 2012. I am paying 550pw for 2*2 apartment which was rented for 650 in previous years. $100 strata pw on these apartments and 10% property agents, not sure why someone will buy an aprtmenet as an investment now.

  17. Lets start a new movement.

    Occupy foreign owned houses!

    Just move in a take over a house that you know is owned by non residents, they can not kick you out as they have no legal standing.

    Actually a few people at auctions with a placard stating that should scare off buyers!

    Maybe anyone that is being priced out of the market can have a friend stand at the back with one of those so that it evens up the playingfield

    • and see how fast you get sued and prosecuted under anti discrimination laws. Occupying a house that is not owned by you without the owners permission is trespass, and i don’t believe anyone on this forum would advocate breaking the law

    • @AF: it’s also trespassing when the parking jerks stick something on my car(property) but do you think I can win that argument in court?

    • It’s called “Adverse Possession”. Where someone occupies land for a certain period of time (dependant on your state laws) they can make a claim of ownership and the title of the land. In Victoria, trespass in not a criminal offence, you can only be pursued by civil action. It only becomes a criminal offence if you wilfully damage the property. Importantly, in order to pursue someone for trespass you need to show you have a right to “exclusive possession” rather than ownership of the land. I am not a lawyer, but if someone has been living on your land for a long period of time, would you have exclusive possession? I would also question whether someone who is not a resident of Australia can pursue you in a civil (or other) matter, given that they are outside of the jurisdiction of Australian law.

      For more info on trespass see
      http://www.lawhandbook.org.au/handbook/ch10s02s03.php

      • Very interesting. We have a very nice beachfront cape cod style property nearby, bought for $1.65m a few years back by a Chinese family. They never use it and the neighbours have to mow the lawns to stop it from looking like the hovel it is slowly becoming. It was the best house in the street at the time of sale. I wonder whether an enterprising youngster might change their address, have all their mail delivered there for the next x years and one day have a claim to adverse possession?

  18. “As we know as well, the vast bulk of Chinese investment in Australian real estate goes into new properties, which add to supply and will likely keep prices down over time.”

    Depends on what you mean by “new”. Many of the “new” home sales in Melbourne’s pricier established suburbs are simply old homes on big old blocks that have recently been replaced with newer, shinier (and much more expensive) ones. Because they are now “new” they can (now) be legally sold to overseas buyers. And believe me they are. This was yet another change to FIRBs rules in 2008/9 under Labour.
    There is clear evidence that this is adding upwards pressure to prices in established suburbs, with subsequent flow on price inflation to nearby areas.

    • Some one correct me if i am wrong but also once the existing house is replaced its capital gains value is “reset” is it not as it is a “new” construction. When it is sold it does not attract any capital gains tax ?

      Does anyone know ?

      • AngryMan, I don’t know, but does it matter anyway? It’s not as though CGT is going to make a difference as to whether foreign money is going to bid up prices or not.

  19. Our dear leaders should be made aware of the general sentiment in voting land. Granted, two thirds of the population who have property are all for continuing high prices, and may be blissfully unaware of what is going on in our suburbs, but for the third of the population left out of home ownership, is there some way we can petition the government? I am pretty sure the policy makers are not reading these comments, but they SHOULD be. Maybe at the end of each day we should send any articles about foreign investment and its impact on property, along with all the comments to each politician.

  20. The writing’s on the wall kids; Balwyn/Glen Waverly etc can be crossed off your list. Quite frankly I don’t know why anyone would want to live so far from the city and the beach, next door to a bunch of freeways. I say let our Chinese friends have it. If you take away the ‘good’ schools, I’m not sure there’s a whole heap left. It’s not inner city (or even close to) and yet it’s not anything close to charming rural either. My old man lives in Mt Waverly and I wince everytime I have to drive out there.

    By the way, there’s no way on God’s green earth that the inherent value of these properties is even close to what people are paying. Good luck to the mums and dads who bought there 15 years ago. Tough luck to any of their kids who want to buy into the same area.

    • True about the writing on the wall

      But I have to say Balwyn is a really nice area with great houses, streets, and 10 mins from the city by freeway

      Glen Waverley has everything a family would want, schools, shops, restaurants, freeway, train so I can understand why it is popular there

      Better than half the retirement villages (Sandringham ect.) that are found bayside

      Those that bought in Balwyn or Glen Waverley a few years ago are set to make a killing

      • Yes indeed. Who would want to live beside the sea & be nestled amongst parks and great schools when for just as much money, you can live nestled amongst concrete out beside a freeway, which is going to see more and more traffic as time goes by…..

      • Bayside is nice, no disputing it, it’s not all acre blocks and green fields out to the sea though,

        A balwyn st looks the same as one in Sandringham, and the lack of a freeway, decent shops and food makes bayside a bit painful, but the beach does make up for it a bit

  21. We’ve sold our children’s birthright to the Chinese Politbureau Elite.

    If Pauline Hanson were economically literate she could have my vote.

    • If PH could put a few sentences together she would have been PM and this would not be happening.

      I’m not even a bit racist but I’m getting there.

      If anyone with a brain wants to be PM, it’s yours. The mood is there for far more reasons than the comments here today. We’ve had enough.

    • What? She’s an economic visionary! Twenty years ago they asked her how she’d repair a faltering economy and she said she’d simply print more money. The entire world laughed at her………………..

  22. Man, the consequence of voodoo economics and a dysfunctional housing market.

    In Malaysia, housing has nearly doubled in real terms in 8 years.

    The bogeyman.. yep … the Chinese.

    Same as Vancouver, the SF/bay area, Auckland, Hawaii… everywhere apparently.

    Global volumes that defy rational thought.

    “Buy now or miss out forever” is more plausiable when it’s the Chinese hordes making sure you miss out.

    As China Bob has stated, the Chinese have a fistful of dollars… AUD and others readily exchangable for AUD.

    It is better they buy a readily replacable property, than a strategically important mine… or Holden.. ohh hang on.

    It is even better that pay 2-3 times the real value for said property. What a way to repatriate our offshore debt.

    An unearned ToT boost in effect.

    How about this, lets built an entire city from scratch, say 350km NW of Adelaide in the middle of nowhere.

    Let’s build 100 million apartments, and restrict it to Chinese buyers only, and Chinese can only buy there and no other city in Australia.

    If those clauses won’t work, then we can let the Chinese buy Melbourne, and every Melbournian move to this new city, into housing cheaper than melbourne, thus we still end up in surplus.

    See how they are repatriating our debt? This should be our opportunity to move our excess debt in our housing market onto the Chinese.

    See how the easy this provision for a select Australian asset they desire is? Bearing in mind we have very few other products to now offer the Chinese, or anybody else for that matter.

    This whole feature is an ENTIRELY human construct, and it’s about rewarding work shy bottom feeders with unearned wealth.

    It’s not an issue with those of Chinese appearance, this is an issue of Australian entitlement.

    • Sill my favourite poster RP! Wishing a fantastic xmas to you and yours Rusty.

      [BTW are you the same rusty penny that used to comment on ZH a few years back?]

    • Nice.

      Then increase the cash rate.

      That way, foreign property owners are effectively paying our depositors (e.g. pensioners, retirees etc.) a higher rate for the ‘privilege’ of owning prized Australian property.

      • hehe, yeah….

        Buy low.. sell high.

        Well, it’s high right now.

        I remember Gerard Minack saying our predisposition is to buy higher and (hope to) sell higher.

        Receive high payments, extinguish our debt, put rates up and crash housing back to proper prices to buy back in.

        It SHOULD be the master gambit.

  23. As a Chinese migrant myself (Hong Kong specifically) and have lived here for over 20 years, I can easily understand the mentality of these Chinese investors. People got to understand that “gambling” is a crucial aspect of the Chinese culture, which is partly driven by the believe of predetermined fate and the irrational believe in one’s own luck. Most Chinese tend to seek “advice” from “professionals” to understand their fate. Obviously, almost all would believe the good things and disregard the bad things. But if the reading on their fate turns out they would be wealthy one day, they would gamble themselves to achieve that destined goal.

    So in all, Chinese people LOVE to gamble. Just go to Maccu and you can see their passion in gambling. In fact, go to your local casino and you are likely to find many of the customers are of Asian origin. To get rich fast is almost like a national sport.

    There is a dedicated TV channel in Hong Kong that talks nothing but analyzing share prices, fundamental and technical.

    So yes, the Chinese are seeking to send their fund offshore to hide them from the communist government, but I believe they are largely driven by their expectation of getting rich in the shortest possible time.

    • Well they are taking a big gamble buying into the peak/tail end of the biggest housing boom in Australia’s history (driven by a once in a century mining boom which peaked in 2010 and the lowest interest rates in Oz history). Good luck to them.

    • Temjin, as the Chinese bid up property prices in Australia, they are actually getting rich because there are so many more Chinese to pay even higher prices for the property next door. Ordinarily, you could say they are gambling by paying way too much for property, but as long as the bubble keeps getting inflated more, their gambling is paying off. In any case, so many of them buy property, and then have a whole lot more money to buy more. I’m sure a lot of this money is ill-gotten gains, but I guess it can’t be proved, and in any case, nobody asks how they can get so much money.

  24. I might have some respect for McLucas’ enquiry had she introduced it while Labor was in power.

    As for the current Government’s government attitude to affordable housing, read Tony Rabbit’s lips- “people like to see the price of their houses go up.”

  25. You guys are unbelievable you’ll argue with your last breath about the insanity of supporting Aussie manufacturing YET without skipping a beat you’ll condemn those that do make stuff.
    I’ll let you all in on a secret many Chinese RE buyers accumulate $AUD through the provision of manufactured goods, for various reasons, mainly to do with Chinese side they often prefer to accumulate profits in local subsidiaries rather than repatriate these funds. It is a kind of reverse transfer pricing situation.

    Now once they have accumulated local wealth is it any surprise that they also desire to play in your own somewhat rigged local RE speculation game.

    Wake-up and smell the coffee, the two events are not completely unrelated, Chinese RE purchasing is just another symptom of Dutch/Australian disease.

    You need politicians with the balls to attack the root cause of this speculation. In my mind it all comes down to the absence of a real holding cost for residential land./ housing. Create a significant land tax (say 3% of value) and watch all this silliness evaporate completely evaporate.

    .

    • @China-Bob I believe you are correct but the problem/phenomena isn’t isolated to Australia, its happening in the UK, in Italy, in Canada — when it was happening in Africa the last 10 years no one batted an eye-lid (except the neo-cons but that’s another story, involving drone fleets in the Indian Ocean) but prices in Angola, Congo, Mozambique, Namibia all went through the roof last decade.

      Then we have a financial crisis in the west and the Asians/Chinese finally realise or acknowledge that all the paper they’ve been amassing as we gorged on cheap consumables from them in exchange for paper, isn’t going to be worth very much they are coming back and SPENDING it! Of course!

      It is phenomena however, and one with explosive consequences at the “football holigan” level of western societes

      • That’s right!!!!!

        Stockpiling of iron ore, gold, farm land,…. you name it. They need to store their wealth in something more real than the treasury notes.

      • You’re correct: look no further than the insane amounts of Freediemac and Fanniemae paper that were underwritten with Chinese money. When the GFC started to really bite the Fed suddenly decided that this commercial paper carried a Gov’t backing (I wonder who’s arm was twisted to make that decision) It is obvious in hindsight that Chinese investors would have been better served by direct investment in US RE then by the indirect investment through the corrupt mortgage market.

        As the old saying goes : Fool me once shame on you, fool me twice shame on me!

        The world economy is stuck in this rut where China must recycle capital or risk destroying its only stable footing, similarly the US must run a deficit to support the global economy. Chinese money flowing into real assets in foreign countries is the inescapable consequence of this situation. Chinese economists and leaders are well aware of whats happening and its tolerated because the process of businesses/businessmen exporting capital relieves the central bank of the need to recycle this cash. Win..win situation.

        To me the solutions are equally obvious it’s just that our weak western politicians and business leaders simply that don’t have the stomach to do the job the public has entrusted them with.

        It is this dearth of true Aussie leadership that concerns me most, where is the acknowledgment of the debt’s wealthy citizens owe to those less fortunate,?where are the investors that are prepared to do the hard yards in establishing worthwhile 21st century Aussie businesses?

        IMHO its all just part of our disgraceful leadership behavior! Economic theory is simply the vehicle by which they dismiss the blatantly obvious consequences of their actions and in-actions.

      • You’re right, it is happening across the board in the developed world, even in places like Russia where loads of Tajiks etc are migrating and Russians are getting increasingly toey.

        Have a look at todays links – pieces in there about Chinese being the biggest buyers in London, buying in Quebec and Vancouver.

        China Bob is on the money in that a lot of companies in China will use offshore earnings as a hedge and want to keep them away from the eyes of the taxation types in China, but I think the bigger issue is just straightforward wave of dough departing China made in China for which there is no place (it seems) in China. I understand the IMF is in the middle of doing a study on the phenomena.

        I dont think there is much scope for holding back ‘demand’ from China connected capital for places to be outside China. I do think there is plenty of scope to tailor the ‘Supply’ of places it can corner in Australia, and that Australia should be doing that. All too much work politically it seems, so eventually we will get the bang – not there yet but we will get it.

        Sorry Bob, you must have replied while I was. You are 100% right – the position of this country and in particular its support processes and politicians (both sides) for anyone wanting to establish a business making something and selling it to the rest of the world is nothing short of a disgrace.

    • The Chinese are not dumb and are picking up strategic assets at a clip. Domestic RE is almost a side issue but the one most in our faces.
      I sometimes wonder how much activity is the result of locally supported or offshore ‘Investor Clubs’ buying up existing homes.
      Would not be surprised if there is a sizable underground network of RE investor clubs at play.
      More fool the ‘Open For Business’ Liberal Party. Funny thing is, they think they can control the outcome of this tidal wave of foreign capital.
      Labor & Libs have flipped FHBs the bird.
      Fend for yourself working class, we are going to destroy you one way or the other seems to be the hidden message.
      The politics of Aus is heading to an all time low from what I see.

  26. Can I ask a silly or stupid question?

    I know when I go overseas or come back into Australia, the limit of cash I can have on me is $10,000.

    So how can these Chinese buyers bring in suitcases of cash enough to purchase a house or two?

    Is ‘cash’ not actually physical money that everyone has been referring to, but monies transferred from a Chinese bank account?