Foreigners cashing in on NSW new home grant

ScreenHunter_06 May. 06 09.27

By Leith van Onselen

Just when you thought the Australian housing policy circus couldn’t get any more bizarre, the Daily Telegraph has reported that foreign buyers of newly constructed homes in New South Wales have been receiving the $5,000 New Home Grant:

As Chinese investors are blamed for driving up Sydney house prices and accused of keeping first home buyers out of the property market, it has emerged that the government is giving them a helping hand.

…under the New Home Owner Scheme introduced in the 2012 state budget, buyers can own multiple homes in their country of origin and still apply for the grant for the purchase of Australian properties.

They don’t have to live in it. All they have to do is apply through the foreign investment review board to buy.

In fact, if an overseas buyer were to buy 20 off-the-plan apartments, they could apply for 20 $5000 grants, Treasurer Mike Baird’s office confirmed yesterday…

LJ Hooker’s national head of home loans, Paul O’Regan, said the investment from Chinese and other Asian buyers in off-the-plan apartments was “significant”.

“We have actually run some trade shows over in China and we had 14 or 15 properties sold just at the trade show,” he said.

So while local first-time buyers struggle to get a foothold in the New South Wales housing market, shut-out by investors (see next chart), the state government is giving taxpayer funds to overseas investors.

ScreenHunter_1106 Feb. 04 17.37

As Catherine Cashmore has documented consistently, the types of supply being built for foreigners is not the kind that locals want and need. It would be so more efficient and equitable to liberalise the supply-side in land, put the tax-payer dollars into infrastructure provision, and let the market determine the nature and magnitude of the construction response.

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Leith van Onselen

Comments

    • Bizarre, Lef-tee.

      A First Home Vendor’s Boost (Keen) is proven to draw demand – usually by bringing it forward. In this example, footloose Chinese flight capital looking for safety is sensitive to incentives as they compare Sydney to Vancouver or Los Angeles.

      Not only are they offered prized freehold title, but the ‘investment’ is taxpayer-subsidised. No wonder apartments are selling like hot cakes then standing empty.

      Next time that codswalloper Barry O’Farrell cries poor and wants to sell off a state monopoly, remind your financially-illiterate BBQ friends where the money will be spent.

      This will end with every Australian citizen broke and in tears.

      Don’t Buy Now!

      • This will end with every Australian citizen broke and in tears.

        Well if they fail to uphold the bank guarantee’s then there will be blood on the streets, that I can categorically guarantee.

      • “…your financially-illiterate BBQ friends”

        I think that perhaps I only really understood how desperately screwed up we are, when on Monday, at the gym, I overheard a young girl — couldn’t have been more than 15yo — talking with a chap probably in his 50’s about RE (Newcastle / Lake Macquarie region). An older sibling was, it seems, looking to buy. The 50+yo chap mentions a place he saw recently, 4 bedroom, going for (or went for, I didn’t catch that bit) $440,000.

        With all the confidence of teenagedom, this young lass pontificated authoritatively on how incredibly “cheap” that is.

        Out of the mouths of babes…

      • @davidcollyer,

        Thank you for the prompt to revisit the Banksters’ Association’s own stats viz. Net Interest Usury Margin.

        From the ABA website, “Banking Facts and Figures, Bank Financials – Bank Results” (pdf):

        “Bank profits for 2013, as measured by net profit … were $23.7 billion, an increase of 15% or $3.5 billion over the previous year.”

        “Banks operating income can be broken into two main components: net interest income and fees and commissions. Over the past three years, net interest income has accounted for 66% of banks operating income…”

        “Net interest income is made up of interest received by banks less interest paid out. Over the past three years, the
        interest paid out has averaged at 64% of the interest received.”

        http://www.bankers.asn.au/Banks-in-Australia/Facts-and-Figures

        Er … a 36% profit margin, on the base practice of usurious lending?!

        Which is practiced on (almost) every dollar and cent “existing” in the entire economy?!

        WAKE THE F*** UP FOLKS.

        [EDIT: It’s just electronic tokens, ffs! Essential for a functioning economy. “Money” (ie, currency) should be a public service provision. Not a tool of mass enslavement.]

      • I just noticed something else very interesting about the ABA’s stats (presented, naturally, in a deceptive manner, since it is propaganda to justify the usury industry status quo):

        “A recognised measure of banks’ loan profitability is the net interest margin which is calculated as the net interest
        income divided by the average interest earning assets.”

        Happily, for the propaganda motive, Net Interest Margin is shown to have experienced a broad decline (see also RBA Chart Pack).

        “Over the 2013 reporting period, banks net interest margin was 213 basis points (or 2.13%) no change over the previous year.

        After reaching almost 400 bps in the mid-1990s, banks’ net interest margins fell over the following 12 years to a low of 206 bps in the first half of 2008. Over the three years prior to the most recent result (i.e. September 2013), the interest margin had been in a tight range of 221 bps to 227 bps. Over the past 18 months this has been 213 bps to 214 bps.”

        Wonderful! Aren’t we nice fellas. Such a low Net Interest Margin.

        Just focus on the torrent of meaningful sounding words folks. Don’t pause to think too hard about the fact that a lower reported NIM can easily be — indeed, will inevitably be — achieved as a direct consequence of increasing the volume of “average interest earning assets”.

        How so?

        Your debt is the banks’ “interest earning asset”.

        So, merely by maintaining a fairly consistent (36%) profit margin on Usury Given versus Usury Paid, then it follows that the more loans we make, the higher will be our “interest earning assets”, and the lower will be our NIM.

        Watch the unicorn folks!

      • migtronixMEMBER

        You’re absolutely dead on Op8 – love to see you bury these fairytales with their own numbers 🙂

      • Thanks migtronix. If only more would do likewise:

        “There are a thousand hacking at the branches of evil to one who is striking at the root.”

        – Henry David Thoreau

        Apologies to all for the inordinate aggro evident in my comments today. Alas, not nearly enough sleep.

  1. If $5000 is enough to convince a foreign investor to invest in new home construction then it is a good policy. Hopefully they rent the houses out, or having bought a home don’t need to compete for existing dwellings.

    • It’s already been shown they are just as interested in existing free standing dwellings. Wha’s more why should the government be “convincing” foreigners to speculate on our domestic housing ? Insane. It’s akin to offering incentives for foreigners to speculate on hospital beds.

      • Um, it’s a new home grant, so does not apply to existing dwellings, even if foreign investors would like it to. It applies only to newly constructed homes.

        You’ll see from my previous comment that I did not refer to foreigners speculating, I referred to investment in new home construction. More houses is more supply, which should lead to lower prices. I would have no problem with foreigners investing in the construction of new hospital beds.

        But, the government needs to get on board with more land releases, then we should see an increase in supply.

      • Monkey – here is what you said

        “home don’t need to compete for existing dwellings.”

        That is what I responded to.

      • Well, if you only read half of the sentence I’m not surprised you misunderstood. How about you read only the second half of the following sentence. I’m not going to bother explaining myself, because you seem like a bit of a f*ckhead.

    • Just because they’re buying new homes doesn’t mean they’re not also buying established properties. There are a lot of foreign investors buying multiple properties. Either way, they’re squeezing out Australian would-be homebuyers.

  2. It must also have the potential to upwardly distort the figures of how many young Australia FHBers are actually buying.

    • LOL. More than enough to offset the FIRE sector’s apocryphal anecdote that three people allegedly didn’t tick the FHB box on their loan application.

      • David, have you heard anything about Cashmore’s anecdote – where she was told by someone from the ABS that the current FHB numbers as recorded by them are actually fairly accurate because APRA requires more than just ticking a box when a lender makes an intial loan?

  3. “All they have to do is apply through the foreign investment review board to buy.”

    Does NSW require the FIRB approval be attached to the grant application?
    How many grants have been paid to foreign nationals/TVHs?
    Can foreigners access the FHBG in other states?
    What is the FIRB data on this?

    Why has the 2012/13 FIRB annual report not been released yet?

    • GunnamattaMEMBER

      From memory the FIRB annual report didnt come out until March or so last year.

      The FHB gimme for chinese investors does give rise to some interesting questions for sure.

      Seeing as FIRB is monitoring FIRB ‘applications’ and FIRB is Commonwealth APS, and the FHB gimme is a NSW gimme you would assume there would be some sort of auditing process on the link between the two.

      Of late I have been snowed nuder with work, but I will try and get round to sussing it out.

      ……..and how FIRB check out if applicants have another place in China or not (given that home ownership in China massive) would also be interesting to know.

    • “The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.” (Marcus Aurelius)

      • migtronixMEMBER

        Ah the last of the 3 good Emperors — which just goes to prove to leaders can be, by nature, magnanimous, benign and constructive — but looking at the 300 year run of emperors they’re not that very often at all…

  4. Surely this must be enough for some to FINALLY click to the political/economic reality, that policy in this country is NOT designed with the best interests of Australian citizens foremost in mind.

    “None are more hopelessly enslaved than those who falsely believe they are free.”

    – Johann Wolfgang von Goethe

    I’m with Russell Brand. Don’t vote. For any of them.

  5. I sometimes wonder what the ADF must think of all this. Imagine signing up and putting your life on the line for a political class than is bent on selling your own country out. Staggers belief.

    • Damn straight.

      In the old days they used to hang people for treason. Now we give them a ministerial office and a six figure salary.

  6. $5,000 is a pittance and it does show how naive many people are.

    Council rates alone are $1,500 on these new apartments. After three years the money is paid back to council.

    If you include all the flow on effects because the $5,000 caused the person to purchase and hence the development to go forwards the $5,000 is paid back 10 x over through.

    I don’t really think the $5,000 is a deciding factor because if you look at agents they don’t even spruick it as a selling point, I bet you for every person who claims the $5,000 there are another 5 who don’t.

    • I doubt many people are concerned that $5,000 acts as any kind of significant incentive. More likely outrage at taxpayer funds being handed to foreign purchasers of housing that they themselves cannot afford.

      • Somewhere, in the back streets of Sydney, a family sits in a rented house. They have been outbid by a mere $5,000 for a fixer-upper. Again. They are out. Dad at the kitchen table in impotent rage that he cannot provide for his family, mum fights back her tears and devotes herself (and that second salary) to keeping the peace, while their children grow up without security – shifted along every time a little landlord wants to adjust his gerbil.

        Mendicants. Landless in an endless land.

        This is not the Australia our big-hearted forebears designed. Devoting our working lives to towering mortgage repayments is NOT the purpose of our existence.

        I don’t raise this out of compassion for some mythical ‘little man’. I am appalled at the sheer wastefulness of it all. All this effort, the tax distortions, the social suppression, the endless scheming to cost-shift and free-ride. None of this enlarges the economic pie.

        Even this forum crawls with paid trolls nipping and tucking at the discussion to maintain this ‘onward and upward’ in land prices that is both foolish and totally unsustainable. The climax we eagerly surge toward just gets bigger with every deferral, every avoidance of the economic facts.

        And after it blows, the whole parasitic FIRE sector will expect to be bailed out by the taxpayer – who happens to be that renting family denied the cornucopia by bad economic settings and poor tax bases.

        You are a pack of bastards.

        Don’t Buy Now!

    • “$5,000 is a pittance.” If it is a pittance, why give it at all? Isn’t it enough that we let foreigners outbid Australians while they can virtually buy an unlimited amount of properties, and at any price?

      Why give foreign investors any reward? Many of us here at MB would like to see LESS foreign investment, not more.

  7. While not supporting the $5k grant to foreigners, I don’t get why we shouldn’t sell as many apartments as possible to foreigners if they are overpriced and we have unemployment.

    New apartments are another export industry. Australian labour in an apartment is no different to Australian labour in a Commodore. Australian sand and gravel and timber in an apartment is no different to Australia steel in a Commodore (if there is any Australian steel in one!)

    We can always rezone more land to apartments if our domestic needs require it.

    • Agreed Explorer.

      But as Pfh has previously argued, we should be selling new-builds only with a healthy LVT attached to fund ongoing infrastructure investment.

      • Patrician, Any state parliament could attach a healthy State Land Tax to every parcel of land not owned by an Australian-born or naturalised citizen with the stroke of a pen. Wouldn’t lose them one vote, either.

    • We can always rezone more land to apartments if our domestic needs require it.

      Therein lies the problem.

    • Neville Gearless

      It all seems a bit perverse, on one hand govt doing every it can to prop the property ponzi, then incentivising foreigners to build white elephant apartments on the other.

      What manner of scheme is this?

      • This is the very corrupted manner. The government can be corrupted simply by introducing laws with anti-national interest or only in self-interest and everything will be legal and lawful, but still corrupted.

        It is not how it appears in the eyes of the blinded public, but what is the real meaning, intention and the consequences of an act. This kind of analysis of the reality has always lacked.

  8. All the gov incensitives will eventually go to seller and agent’s pocket.

    the grands are offered to everyone, in a competitive market it will just be added on top of the selling price because all the buyers would have taken the $5000 into their decision making calculation.

    Also, more transactions = more stamp duty income.. you know how much they are per sale and how easy the money flows in

    • Not to mention the legalised transfer of wealth from the taxpayer to those (developers) who donate to such political parties who implement the policies…….

  9. SchillersMEMBER

    Sadly this not a new phenomena. My wife recalls watching TV ads by RE spruickers pumping Oz real estate and the availability of the First Home Buyers Grant for foreign buyers as far back as 2009. On The Australia Channel on Indonesian TV.

    • Rudd/Gillard. Gillard’s other half just happened to fall into a job ‘selling’ such apartments to foreigners. He surely made a fortune, or did she?