Agents smash RBA, FIRB on foreign property rush

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While the RBA, FIRB and the MSMS are busy quoting one another’s obviously inadequate statistics in a splendid display of Borgesian self-referentiality, those on the ground are getting more and more concerned about the impact of illegal foreign buying on Australian realty. From The Australian:

…veteran Melbourne buyer’s agent David McRae said:

“We regularly get knocked off by certain sections from overseas and money is not an object to them,’’ Mr McRae said. “We don’t expect to win when I come up against people from Malay­sia or China…Let me tell the Reserve Bank: it is a problem and it’s going to ­become a much bigger problem if they don’t do anything about it ­because the local population is being priced out…These guys really don’t understand the impact that it is having.”

McRae estimates a 10% impact on prices. That’s the equivalent the of the entire price inflation of the rate cutting cycle.

…Another long-time agent, David Morrell, said the FIRB’s enforcement regime was akin to “being slapped with a wet lettuce…The rules are so lax — it’s wrong…I think the FIRB have a fair job ahead of them.’’

The article discusses the “open secret” of the rush. It’s not even a secret as far as I can see. The entire industry is cheering it on everywhere I look, from John McGrath down it has been referred to as “unprecedented”.

Houses and Holes

Comments

  1. I suspect the Kelly O’Dwyer FIRB love in (with a list of attendees featuring not a soul questioning the current system or whether the extent of international purchases of Australian residential real estate is significantly affecting Australia’s real estate market) will, in years to come, be seen as a comic benchmark in how to have an inquiry that doesnt lay a glove on a thing – in complete defiance of the reality seen and experienced by a lot of people – a shining example of why politics and administrative process has lost confidence/trust of ordinary everyday punting types……..and when these types go outside politics and administrative process to address their concerns, presumably there will be loads more such inquiries to ask why.

    • “I suspect the Kelly O’Dwyer FIRB love in…will, in years to come, be seen as a comic benchmark in how to have an inquiry that doesnt lay a glove on a thing…”

      Young up-and-comer keen to prove her fealty to free market principles and colleagues? What other outcome could there possibly be?

    • Kelly O’Dwyer took over the seat of Higgins from her mentor, Peter Costello.. So it is only natural that she emulates him with a bit of Orwellian doublespeak, just like slippery Pete did by calling the pension fund of pollies/bureaucrats “The Future Fund”, in an effort to deceive the taxpayers to think it is a sovereign wealth fund.

    • Strange Economics

      There’s too many loopholes (e.g. proxy temporary resident purchasers, send a student over to purchase) .
      Just need to stop temporary residents buying used property. And perhaps like Singapore, etc – add a 10% stamp duty for foreign purchasers.

      • the loopholes are the hardest things to control. eg there are tonnes of permanent residents who may be buying on behalf of family back home. Thats why the most effective deterrent is taxes ie CGT at full marginal rates for ALL, broad based land taxes etc. Thats way we can:
        – build more houses with the additional revenue
        – disincentivise foreigners by reducing their anticipated return

      • Getting through loopholes is the least of their (foreign purchasers’) worries. And talking about ways to deter foreign purchasers is purely hypothetical and largely a waste of time when there is no official recognition of it even being an issue.

        I have said this many times on previous occasions – first you have to get the government to acknowledge there is a problem. And that seems to be the hardest part of all this. In fact, for them, it is not a problem at all, and why would it be? The foreigners are keeping the bubble aloft; the pumping up of prices makes our economy look good, and first homebuyers and other would-be buyers really don’t matter when there are so many people willing and able to prop up the housing Ponzi.

  2. The inevitable result when the responsibility for political economy is handed over to a bunch of unelected bureaucrats who have nothing more to apply to the task than a defunct monetary policy ideology.

    Thus the RBA’s desperate insistence that household debt remains affordable even as they cut rates again and again to keep that fantasy alive.

    Thus the FIRB’s pathetic performance as they try to stop the public getting answers to the questions they want answered.

    Thus why APRA tinkers around the edges.

    Thus why complete silence on the one form of macro-prudential that might actually work – regulation of at least some of the capital transactions that are pumping up the $AUS and allowing the debt ponzinomics to continue like a freight train with no breaks.

    The whole structure of economic regulation and management requires urgent review.

    It may not prevent the problems on the horizon but at least we will be wearing life jackets and be ready for stormy weather.

    • Even StevenMEMBER

      Good post – but what type of macro prudential controls are you referring to as ‘one kind… That might actually work’?

      • Start by pulling the real estate licenses of agencies that dont comply with the FIRB rules.

        When a few agencies are closed the rest of the industry will clean up its act in a hurry.

      • Create a tax obligation upon transactions that break the FIRB rules, making them subject to substance over form penalties, and subject to the ATO’s investigation regime.

        Require source of funds for real estate purchases be reported on by real estate agents where they act in the sale of a property.

        Require real estate marketing activity aimed at customers not located in Australia be an activity specifically licensed by ASIC.

  3. SkoptimistMEMBER

    Sadly, I guess the best we can hope for is the confiscation of any properties that were purchased without proper regard for the letter of the law. The problem is this will probably only be considered after the proverbial has well and truly hit the fan.

    • Confiscation would be a bit harsh – simply require all existing housing purchased by foreign resident non-citizens to be sold within 6 months.

      Ban temporary residents purchasing existing properties and ensuring those purchased to date are sold within 6 months of leaving the country.

      2 steps – nothing complicated – nothing unfair.

      Nothing wrong with new housing being sold to foreign investors providing two conditions are satisfied.

      1. Local construction can supply the increased demand without prices rising

      2. Foreigners cannot borrow from our govt guaranteed banks to purchase the property.

      Of course neither condition is currently being satisfied

      • dumb_non_economist

        Pfh,

        Why not just prohibit it? We know that the ONLY reason foreign buyers are interested is speculation on CG, by ensuring supply etc you limit their CG and you lose their main driver.

        I’m hardly surprised by the “collective” industry view, they need this to prop/keep increasing prices and they’re aren’t particularly interested how it impacts Australian domestic buyers for their own profit.

      • No need for confiscation, Mr Market will destroy them.

        “Mao Daqing from Vanke – China’s top developer – says total land value in Beijing has been bid up to such extremes that is on paper worth 61.6pc of America’s GDP. The figure was 63.3pc for Tokyo at the peak of the bubble in 1990.” Yikes.

        Read more: http://www.mauldineconomics.com/go/v385f-2/BSN #ixzz35PdsCaZe

        He will erase the ‘Gearers too, which will remain ‘our’ problem.

        Don’t Buy Now!

      • Beijing has almost the same population as Australia, Shanghai has more.
        Boy Scout philosophies aren’t going to cut it.

      • migtronixMEMBER

        Beijing has almost the same population as Australia, Shanghai has more.

        And they produce a hell of a lot more than Australians! If China ever lets its currency rise Australia will become the pauper.

  4. who cares, foreign dirty money inflation our house prices is good thing for two reasons: we get money and prices will fall sooner

      • migtronixMEMBER

        So they don’t bring any dirty money with them right? Presumably they are paying a premium to exchange it into non dirty AUD. Any discussion around dirty money must acknowledge that in a debt money system it’s all dirty as it’s all a claim that must be extinguished. Otherwise known as fraud…

      • I’ve been waiting for the crash since 2003.

        Gotta say, its not really working for me so far.

  5. “These guys really don’t understand the impact that it is having.”

    Yeah, they do, actually Mr McRae. It’s exactly the impact they are looking for.

    • +1. Plus there isn’t a hell of a lot of noise about it from the people either. They don’t want their $600k dogboxes going back to what they’re actually worth. Ie $300k.

  6. Start the call for the FIRB head and whatever grub politician is in charge to be sacked.

    • 149 out of 150 MPs are compliant in the ponzi except for Kelvin Thompson.

      Jailing 149 MPs would be quite a history making moment.

      @Mig. USA USA USA! 😀

      • Great….That would be the very best thing in Australia’s history. Kelvin Thompson could do it all on his own.

      • migtronixMEMBER

        Awesome game!! Almost killed me.

        Unlike you Bluebird my self identity isn’t tied to pathetic externalities like football, brown people or dogbox prices…

      • Huh? I’m not the one who slavishly shoots themselves in the foot by voting for importing them by the f#ck tonne.

        Yeah that last goal was a shit. 30 seconds to go. Damn you Ronaldo.

      • FIRB is not even a department within the treasury.. As per Treasury’s own submission to the inquiry:

        The Foreign Investment Review Board (the Board) is a non-statutory body established to advise on foreign investment policy and administration. The Board’s functions are advisory only. Responsibility for making decisions rests with the Treasurer.
        ..
        Treasury provides secretariat services to the Board and is responsible for the day-to-day administration of the foreign investment review framework
        ..
        The Treasury’s Foreign Investment and Trade Policy Division is responsible for the day-to-day administration of Australia’s real estate screening arrangements, in consultation with the Foreign Investment Review Board. The Division comprises around 30 staff members, with about 8 staff dedicated to residential real estate.

      • Okay great…Someone make a press release for Hockey to stand down for gross incompetence, negligence…whatever…..I’ve got three, 100% cases of foreigners buying existing property…There’d be tens of thousands…

  7. ….”http://news.smh.com.au/breaking-news-business/offshore-buyers-critical-to-house-market-20140620-3aidl.html”…..

    ….””We can tell you point blank that foreign investment is 4.6 per cent of the entire residential platform.”….

    We all know it’s far higher than this….Why are they so opposed to having an audit and find the ACTUAL numbers?

    Start the call for FIRB and ministers to be sacked.

  8. It only becomes a problem when they stop buying. At which point, it becomes apparent that better data should have been gathered.

    Meanwhile, it’s a squatters field day.

    Infact, I won’t be surprised if some naked officials disappear, and squatters move in and claim their title.

    FIRB won’t notice.

    • “It only becomes a problem when they stop buying. At which point, it becomes apparent that better data should have been gathered.”….

      That’s a great comment.

      Not sure they’ll stop buying though. How long is it until foreigners are only selling to other foreigners? Madness. Just fking madness.

      Resign Hockey…Start the chorus. Put more pressure on the government than none.

  9. Again, no statistical evidence to support the claims. I do note that agents mentioned focus on high end properties and I’m prepared to accept these could well be desirable to foreign purchasers, but what percentage of sales are to these buyers? Surely the agents keep records.

    Morrell has a blog (an interesting insider lookt at upmarket property)

    ‘The whispers did it

    Often it’s the Chinese Whispers that waft around so many properties that are confusing matters. Increasingly, at the top end, those whispers include Chinese nationals.

    Hushed talk of of plane-loads of Chinese arriving with loaded chequebooks and stratospheric offers for anything labeled trophy.

    All based on a couple of exceptional examples.

    In fact, the vast majority of local trophies are still being bought by locals — but there isn’t a headline in that.’

    http://morrellandkoren.com/?page_id=1101

    • Again, no statistical evidence to support the claims.

      And where is the statistical evidence to support the fact that the Treasury is enforcing the laws of the land? Zero prosecutions so far..

      Speaking of statistics, even the ABS is critical of the fact that FIRB does not share whatever meagre stats the FIRB collects.

      • migtronixMEMBER

        Personally I don’t like the use of the words “statistical” and “evidence” as a conjunction, stats is not evidence, its what you use in lieu of evidence.

        I was going take 3d to task on this terminological clarification, because its weazel words like that are the stock of trade of that “profession”

      • What about the agents themselves providing data to support their claims – particularly if happy to be quoted in the media. Surely simple enough to say we sold xxx properties if which yyy were to foreign purchasers.

      • What about the agents themselves providing data to support their claims – particularly if happy to be quoted in the media.

        LOL.. why don’t you demand the same standards from public officials who are in charge of enforcing the laws of the land?

        Zero prosecutions for breaking the law.. and yet these guys are happy to make submissions and sworn statements (much worse that being quoted in the media) claiming that there is very little law breaking going on.

    • Strange Economics

      And in your own blog reference you quote the Chinese buyer who added 500K (via an interpreter) to the auction bidding this weekend on a 4 million property in Melbourne.
      If the top bidders with foreign money pay 10 % more, and soak up to 10% of the market then it cascades down, as the lower bidders bid up cheaper places.
      If you bring 5 million to Australia for business, Macquarie bank will give you a mortgate for 4.8 million.

    • “no statistical evidence to support the claims”
      “what percentage of sales are to these buyers? Surely the agents keep records.”
      Wrong and right.
      The 2014 NAB residential property survey indicated that 9% of sales were to foreigners.
      That means in the last 12 months up to 30,000 to 40,000 sales of existing dwellings were to foreign nationals.
      In the last year the FIRB approved the sales of 5091 existing dwellings to foreigners.
      Do the math.
      Prove me wrong Kelly, independently audit the last 12mths sales of existing dwellings for Syd/Mel.
      Publish the results.

    • @3d1k

      Agree.

      It’s a total beat and another reason for most Australian’s to justify their racist views.

      • More like another reason for the usual suspects to play the PC “race card” to end debate about an issue that has nothing to do with race.

        If controls over foreign investment in residential real estate was such inherently racist policy you best extend your characterization to most of the nations whose nationals are seeking to purchase free hold title in Australia.

        Most countries carefully regulate who can own interests in land.

        For good reason – they understand the connection between land ownership and colonisation.

      • The number of foreigners purchasing properties is negligible, and generally skewed toward the high end. It’s just like the number of people arriving in Australia as boat people – its negligible when you look at the national immigration numbers. But boat people “evil” and therefore validate racist views.

        And remember, just because someone looks Asian doesn’t mean they cant be an Australian citizen with the name Wayne.

      • The Patrician

        “The number of foreigners purchasing properties is negligible”

        What is that number Bull M?

      • The Patrician

        It’s your anecdote.
        What is the “number of foreigners purchasing” you refer to BM?

  10. I’ve said it before – Brazil is the future of Australia. Once you understand that it all makes sense – massive population ponzi, increased cronyism, nepotism and corruption, massive inequality.

    On the bright side Brazil is a very vibrant interesting place.

    Now, where’s a boomer for me to rob.

    • migtronixMEMBER

      Yup, but don’t tell Peter Fraser, will never happen because Australian political institutions are too strong. *cough*

    • migtronixMEMBER

      Yup, but don’t tell Peter Fraser, will never happen because Australian political institutions are too strong. *cough*

  11. but what does this matter if negatively affected Australians do nothing about it? I see plenty of demonstrations rallying for reugees, gay rights amongst other things but it would appear affordable housing for Australian residents ranks bottom on people’s list of priorities

  12. “no statistical evidence to support the claims”
    “what percentage of sales are to these buyers? Surely the agents keep records.”

    Wrong and right.

    The 2014 NAB residential property survey indicated that 9% of sales were to foreigners.

    That means in the last 12 months up to 30,000 to 40,000 sales of existing dwellings were to foreign nationals.

    In the last year the FIRB approved the sales of 5091 existing dwellings to foreigners.

    Do the math.

  13. There’s 2 major incomes for Australia right now – mining taxes and property taxes, and no Chinese property stampede is going to block government from reaping as much money as they can lay their hands on.
    They KNOW of the economic downfall that is coming our way soon, so today is the day for making hay while the sun shines…….

    • J BauerMEMBER

      Correct, how many English families actually live in London, the majority commute in from outside. I believe this is a deliberate strategy by the govt. Australia has many rural towns/centres with fast aging populations. By making capital city prices unaffordable, younger people and families are forced to move out to these towns.

  14. Something just dawned on me; the powers-that-be do not want affordable housing for everyone

  15. ‘…the MSMS are busy quoting one another’s obviously inadequate statistics in a splendid display of Borgesian self-referentiality,…’

    Well put. They have been doing that on a wide range of issues recently.