ABS: Foreign property data is dodgy

ScreenHunter_2987 Jun. 26 07.34

By Leith van Onselen

More evidence has emerged that the data surrounding foreign purchases of Australian property is highly unreliable, with the Australian Bureau of Statistics (ABS) admitting to the House of Representatives inquiry that it relies on trade magazines and newspapers to keep track of foreign activity in Australian real estate, whilst also admitting that its estimates of foreign investment is “very conservative”. From the Canberra Times:

”We do scan press reports and real estate specialist magazines to try to identify purchases of real estate, and [to] record those and record valuation changes from those. But I have to say, that’s a bit hit and miss,” [ABS assistant statistician, Paul] Mahoney said…

Committee chair and Liberal MP Kelly O’Dwyer asked Mr Mahoney if the actual figure of foreign investment in Australia’s residential real estate could be higher than the ABS believed.

”[That] would be a fair statement,” Mr Mahoney said.

Certainly, the accumulating evidence from real estate agents, industry professionals and others raise big doubts over whether the reported number of existing homes sold to foreigners is anywhere near accurate, with the true figure likely much higher (see below table from FIRB).

ScreenHunter_2988 Jun. 26 07.45

Versus the NAB’s Residential Property Survey of industry insiders:

NAB

Moreover, when combined with the fact that the Foreign Investment Review Board (FIRB) has, since 2010, failed to prosecute any foreign buyer for breaching the foreign ownership rules, and the admission by FIRB that it is incapable of monitoring/enforcing whether a foreign temporary resident has sold their home within three months of departing Australia, it is clear that the regulatory regime governing foreign investment in Australian real estate is not working.

As I have said previously, young Australians have a right to expect the government to implement measures to make housing more accessible by increasing supply, as well as clamping down on excess demand, whether from foreigners or local tax-advantaged speculators.

Let’s hope the Parliamentary Inquiry actually fulfills its role and recommends meaningful reforms to the foreign investment regulatory system.

[email protected]

www.twitter.com/Leithvo

 

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. reusachtigeMEMBER

    WTF! Our eminent stats collectors scan newspapers and tally up ads to determine how many foreign buyers of property there are??? This just validates the deepest levels of the paranoia people are developing around foreign purchases. I think we are totally being done over here and no one in power wants to do anything about it. FFS!

    • Until people take action, as in taking the law into their own hands nothing will happen. I have noticed one thing with PM’s, they learn not to care about public opinion.

      We can get as angry online as we like but that will not translate to much, accept when it’s close to elections, but they will often deflect the focus as does MSM by focusing on smear instead of policy. People who are not so educated get caught up in the soap opera and lose focus of the real issues.

      What needs to happen is mass organization. For example, 10,000 people get together and basically find a foreign owned home that is illegal and allocate it to a family in Australia that is homeless.

      • reusachtigeMEMBER

        Hmmm… starting a movement where you gather the growing disgruntled people with a statement that “we will progressively take over houses bought illegally and fill them with the growing numbers of needy who do not have adequate housing” then get those needy to sign up for said confiscated housing. Brilliant!

    • I’m surprised they didn’t simply send up a ABS cadet economist out to Sydney’s airport to ask a random selection of Asian looking departing travellers if they’d bought a house while out here in Australia…. it would have been comparable with the rest of their statistical gathering techniques.

      • Fabian AlderseyMEMBER

        Which techniques are you referring to specifically? Some of those employed in the household surveys, or those in the economic surveys? I’m sure the relevant areas would be receptive to your suggestions as to how their methods could be improved.

  2. The O’Dwyer Distraction is a setup – a trap for anyone dissenting from the Liberal Party’s perverted ‘free market’ pseudo-philosophy to be branded an anti-Asian racist.

    In their view, a global freedom to buy and hold forever a monopoly asset (freehold land) trumps the interests of those who live on and use the land – taxpayers, remember.

    The FIRB exists in name only. We rely on anecdote and observation to assess the level of alienation of Australian real estate. Why does the government put the interests of a foreign investor class ahead of the citizens it purports to represent?

    Australia was designed by our forebears as a property-owning democracy in which all may flourish. No longer. The situation is very grave.

    • reusachtigeMEMBER

      They do it to protect the values of their own property investments and for no other reason. Their self interest is sickening. We long for revolution! If we continue on this path we may see it one day too.

      • One of the reasons why I advocate removing the people who currently occupy the left.

        If we do have something of a revolt whether it by protest/violence or voting we can’t have a bunch of clueless chardonnay socialist morons running the show.

  3. I spoke to a realestate guy around Double Bay last week and he said one chinese guy bought 4 properties in the areas last week, one was $16.3mill I think?
    I was also looking at Mercs last week and I asked the guy how bus was and he said they had been seling a heap to the chinese, their basic questions weren’t around price, but how to get an international drivers licence.

    • migtronixMEMBER

      And feng-shui licence plates I’m guessing, with a golden waving kitty on the dash?

  4. The Patrician

    Bravo Leith.

    Send it to [email protected]

    9% of sales of existing dwellings to foreign nationals. That is 40,000-50,000 sales per year.

    Last year the FIRB approved 5091 sales of existing dwelliings

    Do the math.

    Interestingly that ABS evidence was given yesterday in an unscheduled public hearing. The appalling state of the data is clearly of interest to KO’D

    The FIRB Inquiry Sydney hearings are on tomorrow in the Northcott Room, SMC Conference & Function Centre
    66 Goulburn Street, Sydney
    Program
    9.00 am Reserve Bank of Australia (Submission 19)Dr Christopher Kent, Dr David Orsmond
    9.45 am RP Data (Submission 23),Mr Graham Mirabito, Mr Craig Mackenzie, Mr Tim Lawless
    10.30 am Private capacity (Submission 10)Dr Adrian Lee, Dr Lorenzo Casavecchia
    11.00 am Break
    11.15 am Curtis Associates (Submission 12)Mr Christopher Curtis
    12.00 pm Meriton Group (Submission 14)Mr Harry Triguboff, Mr James Sialepis
    12.45 pm Lunch
    1.30 pm CBRE, Mr Justin Brown
    2.15 pm Australian Bankers Association, Mr Steven Münchenberg
    2.45 pm Adjournment

    The fact that the FIRE brigade are turning out in force to defend their sham regulator speaks volumes of what is at stake.

    • Yes the turnout has been impressive for both its complete and utter one sidedness and its weight on that side.

      I dont think a single submission has referred in any way to…. ‘the interests of those Australians looking to create families in the immediate to long term without life altering debts and the socio economic consequences of this’ let alone ‘confidence in the administrative/regulatory regime applying in Australia and the respect with which it is held by the Australian population’

      • The Patrician

        Correct. More specifically…

        Not one submission has suggested and an audit of Syd/Mel sales of existing dwellings to fill the massive data black hole.

        Not one submission has suggested proof of purchaser’s compliant residency status be required and recorded on the transfer of title of existing dwellings .

    • p.s. Members of the public are welcome to attend tomorrow.
      The proceedings will be audio webcast live on: http://www.aph.gov.au/live
      It would be great to get our own MB reporter along even just to get the in-person vibe of the proceedings.

      • The Patrician

        KO’D’s explanation for yesterday’s ABS evidence at short notice

        “The Chair of the Committee, Ms Kelly O’Dwyer MP, said that ‘the Committee has now heard from a number of witnesses that the data collected on foreign acquisitions of Australian residential property need to be improved to better understand if current regulations are working well. The Australian Bureau of Statistics is foremost in the collection and dissemination of a variety of data on a national scale and the Committee is keen to get its views on this issue.”

        She is at least alert to the data deficiency.

  5. I know for a cold hard fact that the Department of Immigration (at the behest of their own on-shore protection types) has in the past written to the Treasury/FIRB stating in clear unambiguous terms that non passport and non visa holders are purchasing Australian real estate in significant enough numbers for it to be an issue for them, that the FIRB ‘approval’ process is an administrative sham, and that there is no effective system for monitoring foreign purchases of Australian real estate.

    As has been chewed over here a zillion times there is

    1. absolutely nowhere in the property purchase process where an individual buying Australian real estate would be required to show anyone that they had an appropriate visa or passport.

    2. no scrutiny of funds used for real estate acquisition.

    3. very very little likelihood of large cash sums brought into Australia by individuals being detected.

    4. almost no likelihood of large cash reserves being moved electronically triggering any sort of inquiry from Austrac, which would prompt further examination after an initial inquiry on the reason for the funds transfer being answered ‘real estate acquisition’

    In addition to this every other self respecting law firm involved in wealth management or expat services or migration will put together whatever company/structureor whatever to enable those with the money to buy whatever they feel like.

    Of course the stats are dodgy…..they are an utter fraud.

    Long live Chodley Wontok.

  6. Perhaps that’s why New Zealand is pragmatic enough not to have FIRB regs, at all. There’s no chance of either stopping foreign investment ( who is a foreign buyer? One fronted by a local?) nor keep track of it. Where there’s a will to buy property- anywhere, there’s a way….

    • rubbish. ALL laws are broken that doesnt mean you get rid of all laws. You try to enforce them as best as possible. Foreign investment could be massively reduced by the following:
      1) prooof of residency on purchase
      2) NO purchases for temp residents
      3) hgiher taxes on all properties so speculation of all types is reduced
      4) monitor fund flows as we do for AML
      5) massively reduce immigration to reuce proxy purchases (ie by local residents on behalf of family / friends back home)

      • Of course our laws COULD be enforced. And of course foreign investment COULD be massively reduced. But the govt/FIRB/vested interests would have to want that to happen. And they don’t.

        Your ideas would all work but they are not going to be implemented. Not unless and until the true situation is acknowledged.

      • IMO the solution maybe to “forget” the Federal Govt. and make the collection of relevant information a State Govt. requirement via the transfer of title. It may be possible to make this an election issue in Vic. if enough people make enough noise to their local member.
        If that could occur the next step would be to suggest to the Chinese Govt. that if they asked politely they may get access to a listing of Chinese nationals purchasing residential property in the state. I am sure they would be interested and would welcome the opportunity to conduct any investigation ( purge ).

    • migtronixMEMBER

      Don’t why you spamblocked but yeah, loose underwriting in a low rates environment? Should work out super well…

      The ponzi show MUST roll on! The ennui is killing me!

      • I don’t see it as a “ponzi”, more like criminal issuance of “private” money. The issuers are subject to fiduciary duty, social license, and a whole plethora of legal statues [national and international]. That these have not been enforced – is – the public conundrum.

        skippy…. now who was that demagogue mob that trumpeted deregulation again[????], unleash the free market rational homo economicus Ubermensch…. ummmm…. Doubling down failure is a feature and not a bug with this mob imo.

  7. LabrynthMEMBER

    On the ground in Sydney, it is just Chinese buying up everything at whatever price.

    At a site in Belmore a house had a reserve of $800k (a little low). Bidding went up to $900k from the locals but was taken to $996k by two asian bidders.

    Guess what every house in the area is now worth? You could hear all the neighbours squealing with glee as they went back to talking about their greek tv show Brousko…

    Chinese buyers are pushing prices up in Sydney to unprecedented levels.

  8. This is paramount to reading tea leaves to ascertain ‘statistics’. If the FIRB is doing such a stellar job, why are they not getting statistics from them?!

    What an absolute scam, we are flying blind and being told ‘all is fine, we are paranoid and racist’.

    Thank you Rudd and Labor, your subversion to Australia is no doubt being well rewarded. Liberals collusion is just the icing on the cake.

  9. easy to sort out… The FIRB lack of incentive to figure out who has broken the foreign purchasing law…give them 10% of property exit price …and deduct it from the foreign owner who illegally purchasing the existing property…

  10. sydboy007MEMBER

    I was pleasantly surprised to see they were actually basing their stats on something. Up until today I thought they just had a dartboard with various numbers and the employee of the month would get a throw for the latest stat.

    • migtronixMEMBER

      And what exactly does the employee of the month do different to all other do nothings? Or is that decided with rock paper scissors playoffs LOL

  11. Here is the possible fact

    Everybody knows what actually happens in the real estate market…surely RBA/FIRB/Govt knows it well.. they are not silly people to bury head into the sand..

    This is just a game between wealthy people who control RBA/FIRB/Govt and the foreign speculators…

    RBA/FIRB/GOV want to sell high to foreign speculators and buy low back from them when the market crashes…
    (and you know they have absolute power to do so…interest rate, macro prudent policy )
    and you know much they will get from foreign speculators from property market?

    Just look at what happens in the mining sectors….sell the mining assets/companies to Chinese companies when is boom in 2009 to 2012 etc…now the iron ore/gold etc crashes…time for Australian companies to buy back…

    From what I know, Chinese govt lost billions in foreign investment…

    it is just a game…

    • Yes and the next contestants are lining up to ensure the continuation of the polititico housing complex:

      27 June 2014 9.00 am AEST

      Appearance by Christopher Kent, Assistant Governor (Economic), and David Orsmond, Deputy Head of Economic Analysis, before the House of Representatives Standing Committee on Economics Inquiry into Foreign Investment in Residential Real Estate, Sydney

      Tune in tomorrow for a whimsical nonsensical oration from the folks at the RBA!

  12. Told ya’ll. Should have voted SPP instead of making a mockery of them.

    You only have yourselves to blame.

  13. If they don’t think housing is overpriced, why RBA sell their Kirribilli mansion ?

    http://www.smh.com.au/business/rba-cashes-in-on-sydney-property-boom-with-kirribilli-mansion-sale-20140217-32vdf.html

    Real estate market is just a bigger Casino….and RBA/Govt set the rule…

    Recalled Japan in 1990s?
    Push up the property price in Japan… Japanese bought heaps of US buildings at higher price and forced to sell lower back to US when its own property market crashed????

  14. I am not surprised the likes of SMD are not reporting on the enquiry, don’t want to upset their little gravy train with truthful and ‘independent’ reporting.