How foreign property buyers have dodged FIRB

ScreenHunter_2837 Jun. 11 07.29

By Leith van Onselen

The Australian has published a great report today describing in detail how: foreign property buyers side-step the Foreign Investment Review Board (FIRB) rules precluding foreign non-residents from buying pre-existing dwellings; how FIRB has, since 2010, failed to prosecute any foreign buyer for breaching the foreign ownership rules; and how FIRB is completely incapable of monitoring/enforcing whether a foreign temporary resident has sold their home within three months of departing Australia:

Evidence indicates wealthy foreigners are using lawyers and ­relatives to sidestep the regulations…

Industry professionals have told the House of Representatives economics committee that foreign investors — in the unlikely event that they were prosecuted — viewed the $85,000 fine as the “cost of doing of business”…

…often wealthy investors are happy to let the property sit vacant to avoid triggering FIRB review…

John Hill, the Treasury official in charge of compliance for real estate purchases, told the committee “there is no easy, convenient data that will automatically tell us when an individual has departed Australia and rented”.

Mr Hill said his division was examining up to 40 such cases at any one time and received thousands of calls about infringements, but said “it is very rare that we will exercise prosecution activity”.

The article suggests that foreign purchases of pre-existing homes through family members is substantial, raising doubts over whether the reported 5,091 existing homes sold to foreigners in 2012-13 (valued at $5.42 billion) is anywhere near accurate (see below table).

ScreenHunter_1710 Mar. 18 07.23

The revelation that many foreigners are allowing their homes to sit vacant in order to avoid FIRB detection is also highly disturbing, since such actions effectively reduce Australia’s supply of rental accommodation, placing upward pressure on rents. Certainly, I have heard many anecdotes about homes sitting idle in places like Balwyn and Glen Waverley in Melbourne, which are regarded as hot spots for foreign purchasers.

Leaving aside the merits of foreigners purchasing newly constructed dwellings, which at least adds to supply, the threshold questions that the Parliamentary Committee on into foreign real estate investment must answer are:

  1. whether the $12.7 billion spent (13,571 properties purchased) over the last 4 years on established residential property by foreign nationals is worth the offsetting burden placed on the younger generation of Australians?
  2. whether the rules in place to prevent foreigners from purchasing pre-existing homes, and to ensure homes purchased by temporary residents are sold upon existing Australia, are being adequately enforced? and
  3. whether changes should be made to tighten the foreign ownership rules and ensure their enforcement.

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.

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Comments

  1. StomperMEMBER

    The toothless FIRB have 8 employees to monitor and enforce the rules governing investment by foreigners in Australian property.

    Meanwhile the Workplace Gender Equality Agency has 38 staff (35 of whom are women) to monitor and enforce rules governing gender equality.

    https://www.wgea.gov.au/

    Go figure…..

    • JamesTheBearMEMBER

      Stomper, my wife works for the WGEA – stop picking on them 🙂
      It does highlight how the government doesn’t want to do anything to end the housing ponzi though.

      • Sorry James!!!!

        Just has to lodge our 3x 16 page WGEA 2013-2014 Public Report Form and distribute to all our shareholders, employees and Unions.

        Don’t get me started on bureaucracy and red tape……

        I wonder if the Federal Ministry has been asked to complete this form given their complete lack of gender balance.

        Meanwhile I’d suggest the WGEA start by looking at why there is such gender imbalance in trades and professions coming out of our educational system before seeking to impose targets on gender employment.

      • Stomper,

        “Meanwhile I’d suggest the WGEA start by looking at why there is such gender imbalance in trades and professions coming out of our educational system before seeking to impose targets on gender employment. ”

        probably because women are less inclined and / or able to do such trades / professions and / or stop work to have kids if they can afford it

        … come to think of it, maybe thats why our govt encourages high house prices. If we have to have 2 incomes to buy a house, more women will stay at work thus improving the gender balance stats. Thats how its worked out for my household!

  2. It is debatable whether temporary residents should be allowed to buy existing houses anyway.

    The whole idea that someone comes to Australia on a temporary basis, enters into a transaction to buy an existing house – paying all the transactions costs etc – and plans to exit the market a few years later, does not pass the sniff test.

    If they really want to play the game called residential housing speculation, while here on a temporary basis, they can do so just as easily by buying a new house or apartment and selling that when they depart.

    The rules allowing a temporary resident to purchase an existing property are nothing more than a sham and should be removed immediately.

    • It’s not even debatable really Pfh. All these little things add up to a policy of high house prices, and only make sense if viewed through that lens.

      We discuss this so much on this site, but really we all know that its pretty simple, the the obscene levels of private debt are underwritten by housing collateral. This cannot be allowed to fail without drastic consequences.

    • Strange Economics

      The temporary residents buying encourages people to sponsor a temporary resident just to engage in property speculation. Temporary residents buying could pay 10% tax (as in Singapore or HK, but nothing in Oz).
      It all is rational behaviour by the foreign buyer, avoiding taxes, (and possible govt tax/appropriation back home).
      There have been reports of offering a small business the cost of sponsoring and employing a relative, who can then buy unlimited property.
      As above, the salary is just a cost of doing (property speculation) business.
      As in the paper on Sunday on the wonderful auction news – “A neighbour passing by decided to buy the house for 900k, 100k above reserve (and more above advertised of course). Where do you get 900k in cash on a Sunday.
      Since China is cracking down on corruption, money is being sent offshore to proxy’s to preserve it. A small cost of doing business !
      The property ponzi could in this case also be called a money laundering scheme –
      which benefits the FIRE industry (and stamp duty for the govt) vested interests.

      • Implemented in Jan 2013, foreigner purchasing property in Singapore pays an additional 15% stamp duty (calculated based on the entire purchasing value) on top of the base stamp duty (1% on first $180,000, 2% on next $180,000, 3% for the remainder).

  3. Most young people over say 25 have probably already bought a $600k dogbox and want the kitchen sink thrown at the market.

    No one seems to give a shit. 😀

  4. Whatever way it is happening its foreign cash pushing the market ever hight.

    Reduce immigration. Ban all foreign investment in all housing stock. Monitor money flows. Full tax on cap gaIns.

  5. This revelation has been talked about by countless people. Foreigners using friends or family to but houses here and then leave them empty sometimes. This article is nothing new. Maybe one day we will learn of the revelations that politicians couldn’t care less if we all starved to death yet I still wouldn’t be surprised…

  6. Why are not RE agents, vendors and conveyancers held more accountable? They want the sale to go through then they should be ones that do due diligence as part of the contract and settlement process.

    FIRB are useless, seems their mandate is to sell Australia off as quickly and efficiently without raising to many eyebrows.

    • Remember, FIRB is not there to enforce, it is there to pretend to the people that something is being done. I wrote to my local member once to ask what they thought of foreign speculators and they just sent me back a standard letter saying FIRB was managing this area well.

      High house prices is Australian political policy, until that changes there will be no change.

      • Remember, FIRB is not there to enforce, it is there to pretend to the people that something is being done.

        +1. The only solution is an entirely new political party to sort out the FIRB, and also get the ABC to do their job on this front too.

        Obviously SPP is the best one.

        Although Canada has stopped the rich foreigners from buying there, still the corrupt to the bone parties are in place and it could happen again at any time.

      • Strange Economics

        Privatise it !
        Outsource policing from the FIRB to a private company that can keep 50% of the fines. (Just like speeding fines are outsourced).

        Lets see 30,000 * $85 000 fines is $ 255 million
        could pay a few holes in the budget…)

      • The Patrician

        I like your thinking SE.

        I bid $1 to provide nationwide FIRB compliance enforcement services for residential property + I keep 50% of the fines I collect

        Any other bidders?

    • “…Why are not RE agents, vendors and conveyancers held more accountable?..”

      Forget that, there is an even simpler approach.

      The vast majority of transfers of property in Australia are registered because the Torrens system of title is a registration based system.

      That means that every time someone buys a property the transfer of that property must be registered by a Land Titles Office.

      The Land Titles Office has a complete computerized list of the name of the owner of every bit of Torrens System property in the state.

      Easy enough to require that they only process transfers involving off shore buyers if the property is a new property.

      (also easy for them to record whether the owners are FHB for that matter)

      As for the sham of temporary residents being allowed to buy existing properties, if that is not immediately stopped – which it should be, the Land Titles Offices can easily mark the title record accordingly, so as to allow the FIRB or any interested party to check that temporary resident owners are indeed still resident.

      • I’d like to see a few agencies lose their real estate licenses for processing illegal contracts.

        That will stop it quick smart.

      • Exactly. Don’t need the FIRB on this or anything. If they wanted to stop it, you could do it this afternoon.

        Anyone with more than one property needs to prove where the money came from as well. For legit investors etc, this is no problem.

        These to simple rules will stop almost all illegal purchases.

  7. fitzroyMEMBER

    What one needs to do is sack the current employees of the FIRB. Reverse the onus of proof, and have the AFP enforce the law. Imprisonment is already an option.

  8. Not news to MB readers but really is an interesting part of the housing mess.

    Letting foreign buyers speculate in your established housing market that is already inaccessible to your people is a strange strange thing to do, but then nothing really surprises me anymore on this front.

  9. sydboy007MEMBER

    Yet the MSM will happily get the pitch forks and kindling ready for a good xenophobic burning when they judge the mood as right.

    The fact that WE’VE chosen to allow this to happen doesn’t rate a mention!

    • No they won’t, they will back away from this when it gets out of hand, their masters will come down and guide the ship gently from the rocks. They have to. They earn vast swathes of their income from the politico-housing complex and they are deeply intwined with the high house price policy of Australian politics.

    • fitzroyMEMBER

      We have a law. They have broken it. No Australian has asked for this law to be broken. If the law is not enforced it is those charged with enforcing the law who have failed their young fellow citizens. If those currently at the FIRB will not do their job they should be replaced.

      • Unfortunately that is a very antiquated view of the application of modern financial/tax laws. Most of the practical outcomes of Australian finance/tax related laws rest at the process/procedural level.

        In other words it is far more important what policy position a department takes than what the law actually says. This is well understood and well gamed by the finance industry.

        The rule of law has long since moved on.

      • fitzroyMEMBER

        If the government wants to enforce a policy using the law it can be absolutely brutal. The confiscation acts, with civil forfeiture and the averment provisions of the Tax Act are examples. All it has to do is want to.

      • @fitzroy,

        I agree with everything that AJ says, but note also that the applicable laws ( Foreign Acquisitions and Takeovers Act 1975 and Regulations) DO NOT establish the FIRB, or require that such a body do anything – the Act is clear that the responsibility and authority lie with the Treasurer (or by extension the head of Treasury).

        The Treasurer has more than sufficient resources to seek a different outcome. That neither the current nor previous Treasurer have sought a different outcome means they desire the current outcome. If the Treasurer woke up one morning and had a change of heart, things would change within about 48 hours, whatever the resources required.

        Also interesting is that in an interview with the most recent AFR Weekend, Brian Wilson made it clear that his job is in part to ensure that potential O/S investors are not dissuaded from investing in Australia due to a perception of unfriendly regulators, and has recently toured China, in part to assure Chinese investors that they are very very welcome. Presumably his supervisors (Parkinson and Hockey) strongly approve of his actions and comments.

      • I personally think its a job for the AFP. I spent a part of last year in the foreign bribery committal. Commonwealth funding was not a problem.

  10. Perhaps all property transactions should have a valid tax file number. No tax file number and some form of holding tax is charged to the property title. The same as share purchases.

    • fitzroyMEMBER

      Simply require all landowners to prove compliance with the law on notice with supporting documentation. That should do it.

    • You are missing the point, there are endless ways this could be enforced.

      The policy is that it is NOT enforced.

      • +1

        The problem does not lie with FIRB ‘incompetence’, or anything like that. The problem is that the Treasury, and by extension, the Commonwealth are very very happy with the way the FIRB’s current (lack of?) performance. If Treasury decided tomorrow they wanted a different result, within a couple of days the FIRB could be resourced accordingly including different leadership if necessary.
        Wayne Swan and now Joe Hockey, and Martin Parkinson want it to be this way. Until Hockey and Parkinson change their priority, nothing else will change.

      • With respect, once policy becomes law it is no longer a policy. It is a question of enforcement. You chronicle executive failure on behalf of those who are entrusted with enforcement and heads should roll. No one is more aware of the fragility of our banking system stemming from a property slowdown than I, and the government reluctance to enforce the law. If so the government should repeal the law… Of course that may be political suicide, but it calls a spade a spade.

      • That is what should happen, but that is not what happens. Procedure is the system, laws and regulations are pumped out by idiot politicians at a dime a dozen.

        We all know now that what matters is how the law is applied, not what the law says, particularly when it comes to the endless reams of regulatory law that seek to curb behaviour.

        If it isn’t being enforced it isn’t law.

      • @Fitzroy –

        This is the opening paragraph of the relevant section in the Act:

        ‘Where the Treasurer is satisfied that:
        (a) a foreign person proposes to acquire an interest in Australian
        urban land; and
        (b) the proposed acquisition would be contrary to the national
        interest
        ;
        the Treasurer may make an order prohibiting the proposed acquisition.’

        I have bolded the word ‘may’, to highlight that the law establishes the option, but does not oblige the Treasurer to prevent a foreign person acquiring Australian property, Indeed, as long as the Treasurer is satisfied that it is ‘not contrary to the national interest’ any foreign person can buy any Australian property.

        It seems the Treasurer believes that all foreign ownership of Australian property is in the National interest. Therefore, no foreign ownership of property will be prevented.

      • agree AJ – I studied jurispridence at law school. I think the definition of a law was a “command backed by a sanction”. No sanction here, no law.

      • Section 26A carries 2 years if broken. This governs applications that are NOT made. What the FIRB does is a matter for it. It doesn’t matter what the Treasurer does. If the land is purchased and no application is made then 2 years is the liability. Absolutely no prosecutions, nor I suspect investigations. The exercise of prosecutorial discretion is controlled by strict guidelines and does not depend on the Treasurer.

      • +100 Fitzroy is right.

        https://www.firb.gov.au/content/Publications/AnnualReports/2012-2013/07_Appendix_B.asp

        Substantial penalties apply for non-compliance with the notification provisions of sections 26 and 26A. On conviction, a natural person may be subject to a fine not exceeding 500 penalty units (currently $170 per unit) or imprisonment for a period not exceeding two years, or both. A corporation may be subject to a fine not exceeding 500 penalty units.

        The powers available to the Treasurer under the Act in relation to foreign investment proposals are primarily contained in sections 18, 19, 20, 21, 21A and 25.

        I didn’t find any mention about “stern talking by FIRBcrats” prescribed as penalties for non-compliance under the Act.

        Enforce the Act, send a couple of guys to jail for 2 years and all this dodgy nonsense will stop immediately.

      • Mav,

        The point is the powers are available to the Treasurer, but he has chosen not exercise them, as he is entitled to.

        As soon as the Treasurer wants anyone at Treasury to jump, they will. Until then, well, the status quo maintains…

        EDIT:

        Put it another way. From time to time, Victoria Police (and probably Police in other states) announce amnesties on things like certain gun ownership laws, or motor vehicle laws, in order to entice people to self-report and correct their non-conformances. They are also within their rights to decide to not proceed with a speeding fine or similar. Although they are tasked with enforcing laws, they are absolutely able to overlook certain breaches if it serves a ‘greater good’ (least worst phrase).

        Well, effectively, Treasury and by extension the Treasurer have instituted a permanent amnesty on foreign ownership of real property, because they believe it serves a greater good.

      • No. You are putting the cart before the horse.

        The power to act or not on any breach with the notification provisions of sections 26 and 26A does NOT rest with the Treasurer.

        The Treasurer’s decision making powers starts AFTER he receives notification.

        So rather than acting as the enforcing agency under the Act, FIRB is merely acting as a notification drop box to tick and flick the notifications that they happen to receive on behalf of the treasurer.

        Jail seems harsh!

        Maybe.. but it is a matter for a judge to decide.

      • Another key point in all these types of non-enforcement opportunities is that it is the risk taking early adopters that benefit.

        Usually, a group of people identify that a law is not being well enforced and that becomes a market opportunity that they can win from. Over time others (less disposed to risk) join in until eventually the weight of the distortion may force a procedural response and enforcement.

        By then the smart early adopters have pocketed the easy loot, and have a vested interest in no change. Due to the weight of late adopters, lobbying then becomes the order of the day.

      • The FIRB are not established or recognised by, or, empowered or obliged to perform any task under the act. They are certainly NOT an enforcing agency under the Act.

        The FIRB are an instrument of Treasury policy. If Treasury policy is the FIRB operates a letter box, and occasionally shakes a lettuce leaf, that’s what it is.

        As has been noted, there are more than sufficient resources to investigate and prosecute any breaches that may have occurred – the Treasurer and Head of Treasury simply don’t want to find out about these breaches. I suspect that if the FIRB was to start reporting breaches, it would be welcomed by the Treasurer (to whom the reports are clearly sent) the way cats are welcomed when they bring rotting rodents into a house, and similarly if it was to attempt to prosecute failed notifications.

        No one currently has the task of bringing any of these matters before a judge.

      • Fitz: Agree, but I also agree with AJ’s wording
        ‘The policy is that it is not enforced’.

        It is not an oversight. It is a deliberate, thought out course of action, made to look like inaction.

        wrt AFP I note that the Minsterial direction setting AFP priorities (as close to a list of which Commonwealth laws are deemed worthy of enforcement as you will find) is yet to be updated post change of government. Maybe there is a chance for breaches of this act to be taken more seriously when the new one is released? (probably a chance similar to Australia’s chances in the World Cup…) Potentially, issuing the directive is the task of Senator Brandis.

        In the mean time, perhaps we could start a grass roots campaign within MB for people who notice breaches to use this form:

        https://forms.afp.gov.au/online_forms/report_a_crime

      • fitzroyMEMBER

        @ Statsailor

        The AFP have refined inaction to an art form. Not just in things such as this.

        A question needs to be asked “If the law is never to be enforced why have a police force, and
        why have the law
        and why have a politician responsible for both?”

      • Sorry to be a cynic, but I couldn’t resist.

        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.

        Sir Humphrey: Bernard, what is the purpose of our housing policy?

        Bernard: To house Australians.

        Sir Humphrey: No, Bernard. It is to make it look like we are housing Australians.

        Bernard: You mean, to the Chinese.

        Sir Humphrey: No, to Australians! The Chinese know that we are not.

  11. Is there any scrutiny of Citizens in whom’s bank accounts several million dollars miraculously appear or can buy a house with a suitcase of cash?

  12. The Patrician

    Thanks Leith, your questions are worthy but for me the threshold lies at an even more basic level.

    …and the key lies in the common but mistaken assumption inherent in your second question.

    The FIRB rules do not “prevent” foreigners buying existing dwellings. The rules create an offence. The rules are being breached and offences are being committed.

    Nothing is preventing a foreign national buying an existing dwelling without FIRB approval.

    That is the heart of the deception.

    This can be fixed with one simple requirement.

    Until you fix that, you fix nothing.

  13. LabrynthMEMBER

    This will never be fixed because:

    33% of people own property outright

    33% own property with a mortgage

    33% rent

    Only the renters would wish to see this policy enforced. Why would anyone in their right mind who owns property wish to see less demand by enforcing the FIRB laws?

    • And there you have it. We are determined to drive the bus over the cliff, unfortunately. Sorry, Pascoe.

    • Fabian AlderseyMEMBER

      Because some people see further than simple self interest, and understand that a more equitable society may be more pleasurable to live in?

    • “Only the renters would wish to see this policy enforced.”

      I can prove you wrong. I’m not a renter and I would like to see this policy enforced.

      “Why would anyone in their right mind who owns property wish to see less demand by enforcing the FIRB laws?”

      Speaking for myself of course…

      – I believe high house prices and household debt levels are killing our economy
      – I would like my children to be able to afford a house without having to take out a massive mortgage

      Some people have more to their character than pure greed.

      • I can prove you wrong. I’m not a renter and I would like to see this policy enforced.

        It doesn’t matter because you, and most of you for that matter vote for the pro ponzi parties.

        So for all intents and purposes you may as well have a shrine for Triguboff and the like in your house.

    • On current trends those number are going to look more like…..

      20% own their property outright

      20% own their property with a mortgage

      50% own investment properties to rent

      10% are owned by non-residents

      50% rent

      Once we get to that point the voting power shifts…..

      • Not really Stomper. Policy is purchased by lobbying and there are many examples of where the majority is unfairly subject to the wishes of the few based on their ability to buy policy.

        In the end, age has taught me that the society we seem to want is not equal it is just winners and losers. If you’re not in the winners….

        I have pretty much given up caring at a practical level about this issue. I own my house outright and will make sure i own several houses for my family before my kids leave home.

        It’s not the way i’d like it to be, but it is the way it is.

        C’est la vie.

      • Exactly. If you haven’t owned stocks in the big duopolies during the rise to market power and didn’t take profits as the governments bailed out the banks then you are just an idealist.

    • @lab,

      The proportion renting has grown substantially in recent times and continues to grow. The end game of our current housing policies is that renters will far outnumber homeowners. Some commonwealth electorates already have majority renters – when a juicy marginal electorate has more renters, someone will appear to snare the renter vote very quickly.

      Also, any home owner who doesn’t enjoy being the only real live resident in their street might be in favour of the policy being enforced. Seems like few in that position enjoy it all that much.

      • LabrynthMEMBER

        You fight the nobel cause AB but you would reject losing 40% of the value of your home if it were to happen to you.

        As for the proportion of renters, a lot of them are renting where they want to live and buy investment properties in cheaper areas. It is much more tax efficent if you are happy to live this way. Hence, many renters have an interest in property prices statying high.

      • So they own an investment property and rent another property. Was the only rule that it cannot be a relative occupying the rental you own as an investment?


  14. The revelation that many foreigners are allowing their homes to sit vacant in order to avoid FIRB detection is also highly disturbing, since such actions effectively reduce Australia’s supply of rental accommodation, placing upward pressure on rents. Certainly, I have heard many anecdotes about homes sitting idle in places like Balwyn and Glen Waverley in Melbourne, which are regarded as hot spots for foreign purchasers.

    Sometime last year, the Age published an article about vacant mansions in Toorak, referring to a dozen which were obviously vacant (gates welded shut, boards on windows sort of thing). These were $10 million houses, so their sales were public enough that the journalist was able to publish the names of all the owners, and, in several cases note that indeed they resided in China, with no intention of coming/ returning to Australia (a couple had never set foot here, a couple had apparently lived here very temporarily, but returned to China at least a year earlier)

    Very easy to check and react to, like publishing photos of a robbery being committed, and at some stage the robber brandishes their driver’s licence to the camera.

    Avoiding FIRB detection is not required, just as apparently millions of Australians do not ‘avoid’ the Attorney-General when illegally’ downloading ‘Game of Thrones’. The Commonwealth chooses not to enforce this law willingly and knowingly..

    • The property should be confiscated and refurbished as boarding houses for the homeless!

      • Forgot to mention – the article referred to the frequent presence of security guards across all these properties. Otherwise I suspect squatters would have added extra colour for the journo to report.

      • Well if folks are upset they should act however they deem appropriate. When the law has ceased to be a tool of equality and is a tool of suppression it can hold no moral force over someone aggrieved.

  15. Given 1.2 million taxpayers negatively gear property(s), mere thousands of foreign property investors seems small cheese in the overall scheme of things and in general (apart from select markets) unlikely to exercise undue pressure on housing prices.

    If the desire is to stop the rort, fair enough I guess, but not something to get agitated about.

    If the desire is to dampen property price escalation, there is obviously a far bigger target to focus on…

    • LabrynthMEMBER

      Not neccaserily, the sale of the 5% of property that turns over dictates what the other 95% is worth.

      If chinese buyers are pushing up prices such as locations like Lane Cove where prices were merely around $650k for a 2 bed apartment in 2012 to now selling for close to $900k these buyers have pushed the entire market up.

      When someone sells a raw development site the site will now cost more because the market is paying $900k for the apartments.

      The negative gearing cohort pushed up prices but the chinese buyers have grabbed the batton and are now running the next length. God knows if there will be another group for the chinese buyers to pass the batton on, if not, it will all begin to go backwards.

      • I did say (apart from select markets) where I acknowledge the desirability factor can influence price.

        But surely the huge number property investors (negatively geared, SMSF, etc) have far more impact on not only property prices but also budget revenues – clearly this is the sector to concentrate on.

      • It’s one factor only, sure. But the key difference is that there is absolutely no attempt even to justify the situation because it is unjustifiable. The FIRB charade is a pure lie. That is different from NG. I believe that some fools actually believe that NG is somehow helpful, albeit this is clearly “motivated reasoning” – something you know a bit about 3d.

      • You scared me a bit Lane Cove seems to be around $650-$700k for 2 beds.

        But you’re right sentiment is king and it doesn’t take much to drive it. Ie First Home Vendor’s Grants or Chinese buyers.

        The Sydney market is central and it’s sentiment pervades right around the country.

        For instance I know of someone who was now very smarmy and full of schadenfraude about “winning” in the property market, but now that they want to upgrade, it’s dawned on them that they’ll need to borrow a lot more money and they now want to move to another town. Herpy derpy.

        So the Sydney market has just made someone possibly bump up another market.

        You could remove NG but you could possibly just import immigrants like crazy to counter the downward pressure. But I don’t know what they’d do for work. There’s not that many terribly useful people in the world.

    • Let’s be clear, the 5000 FIRB approved foreign purchasers of existing dwellings are only those that could be bothered self-reporting to the FIRB and are just the tip of the iceberg.

      The 2014 NAB Residential Property survey indicates there could be as many as 30,000 to 40,000 unapproved foreign purchasers of Australian existing dwellings just in the last year.

      This massive hole in the data collection is one of the major problems. You can’t manage what you don’t measure.

      • +1. Indeed 3d, you can’t tell me the size of the problem. So don’t guess that it is a small one, when it obviously isn’t. It is also illegal. It does of course worsen all the other problems.

      • @Fitzroy no one can tell you the size of the ‘problem’ or indeed if it is a problem at all!

        However I’m sure some property guru here can whip out numbers of properties investor owned, negatively geared, etc which would clarify at least that far more substantial end of the market.

      • It’s a big effect, you don’t need the numbers to know that loose liquidity on the side setting the price at the margin flows through the pricing.

        The flip side is it will end as a big ugly mess, as it always does.

      • 3d1k – agree with you on most things, but not this one. The FIRB only shows self reported numbers.Thats said, foreign investors are probably not the main problem, it is CHINESE MONEY. This is either due to:

        1) recent immigrants bringing chinese money with them
        2) temp residents buying with money from china
        3) foreign investors buying illegally with money from china

        4) residents buying on behalf of family friends with money from china
        5) foreign residents buying LEGALLY by obtaining approval

        When I see 5 groups of “oriental looking people who dont speak good English” at one auction driving prices to obscene levels I have no difficulty concluding CHINESE money is PROBABLY why they can outbid locals. They could be any of the above 5 categories, so we need to address all the causes. HOW?
        1) massively reduce immigration
        2) outlaw temp residents from buying
        3) ensure MANDATORY provision of passport / visa details on ALL sales
        4) monitor fund flows for large transactions potentially for property (a harder policy to enforce but not impossible, we do it for anti money laundering)
        5) full CGT on property – this ensures foreign money invested at least gets full tax when residents buy on behalf of family / friends

      • @ Squirrel,
        The problem is China is our biggest trading partner and the reason we enjoy a high standard of living is China purchasing our commodoties, bit like certain middle eastern countries enjoying a high standard of living due to oil, if an alternative source to Hydrocarbons was found tomorrow they would be toast. If we closed our doors to foreigners particularly China it would create political unrest, no politician is going to risk that

      • The lack of statistics is because of the non enforcement of section 26A. You would contend that a few people should be locked up after investigations launched and then we will know the extent or otherwise of the problem. Lets do it together and see who is right.

      • Sitting at my desk as im writing this im looking two desks down at the monitor of a young Chinese graduate accountant that works for us. He is scrolling through REIWA website and domain.com.au right now. He is a graduate and he owns 4 houses and 1 3brm flat. He lives in a 4×2 in applecross in Perth, on his own and his GF lives in the flat, and i know she dont pay rent either. So here is a 20 something year old graduate, earning graduate wages, who is Australian resident who owns multiple properties. His parents are of course in china and own several business apparently, and he would not be looking at realestate websites unless he is planning on purchasing more. The fact is i see him on those websites on a daily basis.
        Is anyone going to try and convince me he is not purchasing Australian real estate on behalf of wealthy relatives overseas ? and how would this even be policed and or recorded or controlled.

      • @3d

        The lack of statistics is because of the non enforcement of section 26A. You would contend that a few people should be locked up after investigations launched and then we will know the extent or otherwise of the problem.

      • Almost impossible to police or control. Canada just closed its doors to rich foreign investors under the “Immigrant investors program” as it was creating a dangerous property bubble and look at the backlash. Locals in all the major cities will be eventually living on the fringes whilst foreigners will be occupying in and around the CBD. I have no problem with immigration but when it creates a ponzi bubble like we’ve never seen before something needs to be done. Kind of looks like rich Chinese are fleeing China due to their own property market about to collapse.

        http://english.cntv.cn/2014/06/09/VIDE1402265284236933.shtml

      • The Patrician

        “Almost impossible to police or control”

        Wrong

        Foreign puchases of existing dwellings can be prevented with one simple requirement.

    • My view is arguing about foreign investment being key driver increasing property prices is largely futile when insufficient data exists. There is a likelihood that the foreign investor market is active in certain geographic locales and may influence property prices in these areas.

      However we do know that some 1.8 million Australians are property investors, with around one third owning multiple investment properties. We do know that investor finance has reached record levels. We do know that the majority of investment properties are negatively geared.

      Based on this it would appear reasonable to suggest that the domestic investor market plays the major role in supporting and/or elevating property prices.

      • The Patrician

        How about we start by collecting the data?

        Require purchasers residency status be recorded on the transfer of title.
        I am amazed this is not standard practice.

      • fitzroyMEMBER

        And prosecute those who don’t supply the information. Think of all those investors who are paying too much in an inefficient market. Can’t have that can we 3d??

      • The Patrician

        You don’t have to prosecute those that do not supply residency status.

        You simply require that it is a mandatory field on the transfer of title document.

        No status no transfer.

      • fitzroyMEMBER

        May not be enough Patty. One should have to establish where the funds are coming from with original documentation with a reverse onus. Maybe with certification from a police officer or official. Merely a space for the nationality of the title holder is not sufficient.

      • The Patrician

        “Merely a space for the nationality of the title holder is not sufficient.”

        I should be clearer. Proof of compliant residency status i.e. Aus passport number

  16. The bigger the bubble the bigger the burst, at some point foreign buyers wont be propping up our Ponzi housing any longer. The gov will move heaven and earth to ensure housing remains high, high revenues, high taxes etc. Melb and Syd are booming along property wise yet rates are still at record lows, big red flag. The Gov doesnt realise how vital first home buyers are as they keep property churning over, without first home buyers speculators are left to speculate amongst themselves and that is only going to end badly

    • It almost goes without saying that this will end in an epic mess. Opportunities for some, carnage for others.

      • China insulated us from the last GFC, they wont be there to purchase our iron ore in vast amounts anymore as their on the verge of implosion themselves, once the money stops flowing into Aus, liquidity will start to dry up and the house of cards will fall down. Our property market is about as stable as a sandcastle on the beach. Holden, Ford and Toyota have closed up shop. Qantas is heading south, Telstra are offshoring gradually, and finally BHP have started to cut their workforce due to iron ore price in freefall. If anyone can tell me the eyewatering prices of our major cities will hold please do so..

    • the fhb has been replaced by the foreign buyer

      there are possibly millions of them

      sure it will end but it isn’t likely to end just yet

      the end game is that Australians live here, pay taxes and rent

      foreign owners make money in offshore jurisdictions (maybe pay tax) and own

      • Succinctly and accurately put williros.

        Prices are set at the margins.

        The official statistics are hazy, and deliberately so.

        All the penalties associated with so-called laws in this area are preceded by the word “may”.

        Our elected representatives are turning a blind eye to the impoverishment of a large number of their own people, particularly the young, while permitting the proceeds of money laundering to feed the property Ponzi to the benefit of a privileged few.

        Try doing the same thing in the other country involved and see how far you get.

        Our leadership are not in office to serve any interests above their own, and they continue to turn one of the most naturally blessed and potential-bearing countries in the world into a milking cow and a laughing stock.

        Shame.

  17. I can see a squatter movement brewing. ‘Free’ shelter in suburbs like Balwyn and Glen Waverley.

    If the squatters are smart they can be hard to dislodge, particularly if the property title was purchased in ‘dodgy’ circumstances.

  18. Australian Nationalist Party

    Did you hear about the candidate disendorsed by Palmer United Party? Buddy Rojek, was disendorsed after having to find volunteers to help him on his campaign, because the Palmer United Party members for his area failed to respond to his pleas for assistance on the campaign. So he organised a free party with models as hosts and was splashed all over the front page of the local newspaper. Palmer’s Party promised him $10,000 in election campaign expenses, but they never repaid him. Now he is setting up the Australian Nationalist Party. All its policies are on Facebook. Even if you don’t have Facebook you can view the policies. Now he is writing to Palmers electorate telling them of his story. Australian Nationalist Party won’t put up with this Foreign Investment scam.