Treasury shows foreign property buying rocket

ScreenHunter_06 May. 06 09.27

By Leith van Onselen

Another day, another report on the huge surge of foreign investment in Australian property, this time from The Australian:

In the first nine months of this financial year, sales to foreigners are almost double the total from the whole of last year and represent a record 13 per cent of the total value of property sold. In Victoria, purchases by ­foreigners made up a massive 23.2 per cent — almost a quarter of the total value of property sold in the state over this period. The data — extracted from Treasury figures and supplied to a parliamentary inquiry by RP Data — undermines claims that foreign investment is an ­insignificant share of demand.

Surely this evidence from RP Data debunks, once and for all, the notion that foreign purchasers of Australian property are an insignificant share of demand and are not working to price locals out of the market. It also accords with the latest NAB property survey, which found that foreigners accounted for nearly 10% of demand for pre-existing dwellings in Australia (see next chart).

ScreenHunter_3049 Jul. 01 07.10

When viewed in light of recent reports from the Australian Bureau of Statistics, real estate agents, industry professionals, and UBS investment bank, it is clear as day that the official Foreign Investment Review Board (FIRB) data on foreign property investment is inaccurate.

Further, when combined with the fact that 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, then there can be no doubt that the regulatory regime governing foreign investment in property is broken and fundamental reform is desperately required in order to restore faith and integrity to the system.

Thankfully, the chair of the House of Representatives Inquiry into foreign property investment, Kelly O’Dwyer, appears to have taken these concerns on board, yesterday flagging that the inquiry report would recommend “new application fees, tighter enforcement of the prohibition on acquiring fixed homes and possibly extra stamp duty for foreign investors”.

This is a wise move, as foreign investment into Australian property, and housing affordability more generally, is fast becoming a hot political issue.

Young Australians also 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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Unconventional Economist

Comments

  1. I reckon take those figures and double it, the obfuscation around this issue is deliberate and exploited by all those only interested in profiteering to their own pockets.

  2. sydboy007MEMBER

    I say put hte onus on the seller to confirm the entity buying their properly has a legal right to do so.

    Set fines at 10% of the sale price if they don’t do their due diligence – simple box tick of someone saying they are legally allowed to purchase the property isn’t enough.

    • and go back over about 4 years worth of transactions and establish the bona fides of those transactions.

      Lets not forget that MB has been well ahead of the curve on this issue for about 2 -3 years, and in all that time anyone questioning the level of international buyers of Australian RE have been sandbagged with lack of data, accusations of racism, etc etc

      • Schadenfreude

        – Repossession’s
        – Big fines
        – Deportation’s

        I expect all of the above…

      • “accusations of racism”….Here’s a couple of people I’m sure benefit from it and surprise, surprise are media personalities with a very skewed view on it…Most people, I think are very opposed to it, but because we’re run by a collusive media, filled with puppets (and wealthy self interested grubs) telling us we’re all racist, everyone’s scared to say a thing.

        https://www.youtube.com/watch?v=qH8VC3CrTYw

    • While it makes a lot of sense for allowing foreign investors to purchase therefore fund new developments which will increase supply stock and generate economic activity, its quite a damaging activity to allow foreign investors to purchase existing dwellings. This has essentially exported the asset overseas, which means the young australian citizen looking to purchase and raise a family in whose income is derviced from local salaries and employment and interest rates will never be able to compete in such a market. So in essence, the govt is selling out its young people, its own people.

      Its hard to fathom then that this government be in Labor or Liberal is acting in the interest of a large portion of its people, it is doing what it can to sustain an asset bubble which gives the older deomgraphic the illusion of wealth on book paper value only of an asset which long ago had gains only on speculative book value… A house in ashfield, brisbane, box hill etc. is only worth as much as what the next guy is willing to pay, and that depends on where that next guy is from, if they make it open slather for foreign investment or even by enough means to get around restrictions, then this bubble could go on for quite long, as long as igonorant foreign investors are overly cashed up and need some place to plant their money, but Australian real estate I would not consider any safe, but the average middle class chinese purchaser does not know this, and the spruikers have convinced them by using past performance that this is a solid investment to secure their future … same old story it seems.

    • drsmithyMEMBER

      I say put hte onus on the seller to confirm the entity buying their properly has a legal right to do so.

      That doesn’t seem reasonable to me.

      If someone comes and buys my car, it’s not my responsibility to ensure they are properly licensed to drive it.

      If I’m some random punter wanting to sell my house, maybe privately so as to leech as little money as possible to the RE industry, the possibility of picking up a huge fine because I’m not prepared to spend $thousands doing a background investigation on every potential purchaser is rather burdensome. And that’s just for simple scenarios. If there’s an organised scheme of fraud in place – say, groups of genuine residents fronting for foreign buyers – why should I, as random everyman just wanting to sell my house and move to another city, be on the hook for their illegal activity ?

      • there are rules in every state which says what is a valid sale, ive sold a few cars in my time…. although in victoria you dont need a licence to buy a car, im sure if you are breaking any laws either you or the buyer that govern the sale process, the sale could be rendered void…

        there are measures in place to stop the ownership / registration from changing hands also, so I guess, to do this for property, the governing bodies my establish sufficient loopholes to allow foreign money to flow through 😉

    • We have Torrens title system. That is the best and only place any due diligence needs to be done.

      All title transfers not to an Australian resident for purchasing purposes will be null and void and will result in the sale falling through and the buyer forfeiting their deposit. Don’t need any other penalties.

      In fact this should already be happening:

      https://www.landgate.wa.gov.au/docvault.nsf/web/PS_TR_SEPRESENTED/$FILE/Land_Title_Transfer_Verification.pdf

      The title transfer office will keep track of all purchases and FIRB will look into suspicious transactions (multiple by one purchaser etc etc). In case it is found that a buyer is purchasing on behalf of a third party that does not have the right to purchase said property, they will be made to liquidate such holdings and face appropriate penalties.

      • Only question I have is if the ABS & FIRB acknowledge they do not have any valuable statistics on this why can we rely on those of the banks or RP data. What are there sources ??. Suspect the issue is greater than they are pointing out.
        Re penalties; without implying any racism; State Govt. should collect the data; passport no. visa no and expiry date etc. for foreign nationals; and pass it on to the Chinese Govt.
        Helloooow woodshed.

  3. reusachtigeMEMBER

    If you mention the issue of foreigners buying up our property you are rashist! Another rashist article with a China-lady in the image… 🙁

    • With reusachtige, I was deeply skeptical about this HoR economics committee inquiry. It smelled like a setup to smear all critics of ‘free trade’ in land assets as racists.

      Whether chair Kelly O’Dwyer did a quick segue into a People’s Champion stance urging tax and regulatory measures or our pollies really are upright citizens focused on the common good, we will never know.

      Australia is one of the few countries in the world where foreign nationals can buy freehold land at will and pay minimal taxes on buying and in particular holding land – we prefer to tax wages and business, to our great cost.

      We should have a stiff federal land tax on foreign landowners. And I would define foreigners very broadly, say anyone not on the electoral roll.

      Meanwhile, here is evidence many ingredients of the fragrant bubble bath in which we luxuriate are imported. For certain, the water will go cold and the delightful bubbles turn into soap scum.

      Don’t Buy Now!

      • Schadenfreude

        “”We should have a stiff federal land tax on foreign landowners. And I would define foreigners very broadly, say anyone not on the electoral roll.””

        Could not agree more…!!!

        And strict enforcement against buying existing stock.

      • You exclude those who may not be dual citizens. Generally citizens of First World countries. How about just resident taxpayers.

      • SaCo: land is the best base for taxation, alongside resources. No one gets hurt, no one is deflected from useful economic activity. We have a principal place of residence exemption from State Land Tax. If this is their home, fine. If it is one of a number of properties they flit between, they can bloody well pay up.

        Our SLT bases leak like a sieve, because pollies have punched holes in it.

        Are you proposing further abuses? Sure sounds like it.

      • I am concern talking about country selling their kids, foreigners buying land in Australia etc.
        I assume none of the respondant are foreigners, do you know how difficult it is to buy land or business in Australia, I know it I am classified as foreigner , being a kiwi citizen, bringing in $1m in funds with risk I might not even get residency?
        I cannot even get bank loans, I have right to work and buy business being a Kiwi, but no residency etc.
        So it is your duty to earn and educate your kids and provide for them not the governments job, they have enough rules for foreign investments. Foreigners contribute vast amount to GDP.

      • “Foreigners contribute vast amount to GDP”……I don’t care. Per capita GDP is going backwards. In other words, the growth in GDP is only supporting more people, not making the existing ones better off.. A circular disaster.

        So because Australia has given you many rights, you deserve more?

  4. It’s just a massive coincidence that pretty much all left wing thought process results in higher wealth for the left wing. Evil, manipulative liars.

    https://www.youtube.com/watch?v=qH8VC3CrTYw

    The left wing are destroying Australia for their own greedy, selfish purposes while telling us all they’re so selfless and caring. Shame on you all. There’s nothing more infuriating than watching generations of Australians being manipulated and indoctrinated with BS left wing environmental policy that means nothing, zero, zilch while we continue populating Australia. It’s a scam, a trick, a dirty lie. The environmentalists from the left are either extremely dumb or simply greedy and evil. Carbon reduction while doubling population? Laughable. Improving the environment while populating? Laughable, left wing nutter BS.

    • interested party

      “Carbon reduction while doubling population? Laughable. Improving the environment while populating?”

      So true……missed by many though.

      • Thanks UE, I’ll have a look. I don’t want to think ill of the left because I’m a compassionate guy and environmentalist and sometimes hear genuine stuff come from them. I love people, just not lots of them, we destroy everything in our path. More of us means more destruction….A concept not so hard for anyone with average intelligence to comprehend but seemingly lost on so many.

        Seen here for example…https://www.youtube.com/watch?v=qH8VC3CrTYw

    • Nothing was more hypocritical then the Labor party running a climate change agenda but at the same time going feet first into pushing for a Big Australia policy. A scam of the highest order.

    • “Carbon reduction while doubling population? Laughable.”

      Thank you rich42. An excellent observation, one that had not occurred to me. Kudos.

      Another example of the extreme cognitive dissonance evident in the rhetoric, actions, and non-actions of our erstwhile leaders.

      • @Opinion8red…Your higher order of thinking than everyone else is astounding. You should post some of that meaningless sharing of resources stuff.

        @Powermonger…Yep…and never challenged once by the media. It’s the biggest scam imposed on a country by it’s “leaders” and population in history.

        Preying upon peoples’ good will and lack of intellect. It’s beyond disgusting. The Greens are no better. Australia needs a new party to expose all of this. Not sure how they’d get airplay in today’s growth driven media…Quite the conundrum that will eventually bring Australia to its’ knees.

        For some reason I’m blocked from posting above….MB has changed since going paid…Just kidding.

    • Then you’ve also got the feminists constantly whinging about the “patriarchy”. Making out like it’s your average schmuck on the street like us. When I’m sure as men and women we could all get together and fight the real enemy, the FIRE sector.

      The left’s maturity level is at about 15 years old, I’d rather work for the dole than have these f#cktards in power. 😀

      • drsmithyMEMBER

        The left’s maturity level is at about 15 years old, I’d rather work for the dole than have these f#cktards in power.

        In power ? Where are the “left” in power ? Certainly not Australia, which has been in the thrall of the neoliberal right for decades now.

        You guys and your pavlovian need to blame everything on “the left” does get a bit boring after a while.

      • @drsmithy…Well how do you justify their positions on everything that coincidentally ends up making them money? If you want to show me a genuine left wing party that is compassionate and fair I’ll vote for them..What we have is a nut bag left that wants to populate Australia at the expense of everything that’s fair…OR….is that your point?

        Like I’ve said before you can have fair and compassionate….or…you can have a large population. YOU CANNOT HAVE BOTH. That’s either lost on the left, or they’re lying as I think you’re implying by saying there is no left atm.

      • @Smithy.

        Well that’s another obfuscation the left always does, say there’s no left!

        They say that about the devil too.

        I blame the left because it’s the left’s job to be attacking ponzi schemes etc and they didn’t, and now it’s too late really because the only fix is a crash.

        Also what Rich said.

      • drsmithyMEMBER

        Well how do you justify their positions on everything that coincidentally ends up making them money?

        Who ? What “positions” ?

        If you want to show me a genuine left wing party that is compassionate and fair I’ll vote for them.

        Closest you’ll get today is the Greens. Otherwise, you’ll need to seek yourself out an independent.

        What we have is a nut bag left that wants to populate Australia at the expense of everything that’s fair…

        No, we don’t.

        OR….is that your point?Like I’ve said before you can have fair and compassionate….or…you can have a large population. YOU CANNOT HAVE BOTH. That’s either lost on the left, or they’re lying as I think you’re implying by saying there is no left atm.

        False dilemma fallacy.

      • drsmithyMEMBER

        I blame the left because it’s the left’s job to be attacking ponzi schemes etc and they didn’t, and now it’s too late really because the only fix is a crash.

        Yes, yes, we know. You blame the policeman who didn’t stop the guy that robbed you, but think the guy who actually robbed you is a good bloke who just wants to help you move house again.

      • @Dr smithy….”False dilemma fallacy.”…Show me one example that has both a large population and fairness and compassion….America? Funny.

      • drsmithyMEMBER

        Show me one example that has both a large population and fairness and compassion….America? Funny.

        Larger than what ? More fairness and compassion than who ? When does a population become “large” ? What is considered “bigger than idea” but still “not large” ?

    • @rich42

      Big Australia is a bipartisan policy. Moreover this is a policy of many government in the “west”. The blame lies in all off us for not opposing this more vehemently.

      • I do think though that the naive public is manipulated into it with false information especially via a grossly biased media and grubby politicians. That’s pretty much my point. The disgraceful so called “left” and “environmental” parties betray the exact things they apparently champion, and you’ve got people on here aggressively defending it.

  5. ” In Victoria, purchases by ­foreigners made up a massive 23.2 per cent ”

    Well, I guess that explains why in Victoria the investors share of mortgages is lagging behind NSW. We have fewer investors but more foreigners (ungeared/not borrowing locally) down here.

  6. nexus789MEMBER

    Definitely the dumb country. Run by a greedy self interested cabal. Try buying property across Asia or becoming a citizen in any number of those countries.

  7. I think there is a little too much celebration here about not being racist, as if that was the issue. Anyone would think racism wasn’t a serious problem in our world, a fantasy . . . ?

    I don’t think investigating this situation is racist, or is reporting on it sensibly. And I don’t think MB reportage has been racist, namely because it has continued to remind us that negative gearing is an equal problem and that it is Australian policy that allows this to happen. It is in our control as a nation to change this.

    However, sections of the media and populace do use this information in a racist way. There is a shrillness to the discussion that points more at WHO is buying rather than WHY are they allowed to buy.

    Considering the history of racism in this country I think we should welcome wariness in this regard.

    I amfor banning ALL foreign ownership of property, but I am MORE for ending negative gearing and creating a land tax that would sort out a lot of this problem while catching our home grown problems as well.

    • If Australia used land tax instead of taxing low and middle incomes, foreign owners would pay for our hospitals, schools and guns and bombs (defence). We would welcome their explicit subsidy.

      Cutting wage taxation would kill NG at a stroke.

  8. “Thankfully, the chair of the House of Representatives Inquiry into foreign property investment, Kelly O’Dwyer, appears to have taken these concerns on board, yesterday flagging that the inquiry report would recommend “new application fees, tighter enforcement of the prohibition on acquiring fixed homes and possibly extra stamp duty for foreign investors”.”

    I’m sure them current government will look this over very carefully, consider all sides of the argument then go and ask their vested interest groups that hold the leash on the liberal party what they would like.

    The vested interests will remind them that they put them in power to protect their property portfolios and they need to get right onto jailing innocents who download to protect their media monopoly’s.

  9. sydboy007MEMBER

    I suppose we’ve linked the east cost gas market to export parity, so might as well link the housing market to export party as well :/

  10. CONGRATULATIONS AUSTRALIA!

    CONGRATULATIONS INVESTORS (predominantly boomers)

    YOU HAVE SOLD OFF TO THE HIGHEST BIDDER, AND HAVE LEFT ALL YOUR KIDS FUTURE PROSPERITY BEHIND.

    Our kids will be more impoverished now because of your inaction on this.

    Artificially inflating housing prices and keeping the property market buoyant enough to cater for all the investors and THEIR future………NOT the future of our future generations who were born here, and want to dream, that one day, like their parents, they too could have the opportunity to buy their own home.

    No, you have denied our kids that, by selfishly selling off to overseas investors, a lot of whom dont even live here.

    To our kids, I say, I am so sorry that your forefathers have denied you the opportunity that they had.

  11. CONGRATULATIONS AUSTRALIA!

    Let’s keep filling up Australia with people, since there are just so many unfilled jobs here correct?

    What on earth is going on in Australia?

    It is beyond reason, beyond joke, thus can only be by design.

    How humane is it to keep bringing people in, and putting them on Social Security?

    Or is this just a subtle way to put downward pressure on wages, since to compete in a global market, we are overpaid?

    We are headed third world, and fast.

    We think not of our own. God help our kids.

    • Agree with all you say Steernorth, yeah where are all the jobs? This morning the Missus was looking on Seek and saw a part time secretary job at a golf course here in Sydney, she knows the manager there…she gave him a call about 10.30am re the job and he already had over 200 resumes….and the stupid housing charade keeps on going….meanwhile in the Hills area where we live the number of newly arrived Chinese grandparents out in the parks and playing fields with their grand kids is ever multiplying…”good day how are you”…”oh oh (big cheesy grins) no no engilisshhee sooorrway”

    • drsmithyMEMBER

      Or is this just a subtle way to put downward pressure on wages, since to compete in a global market, we are overpaid?

      It’s not even a subtle way, it’s all-but-explicit policy of wage suppression and empoverishment that’s been going on for thirty-odd years.

  12. WHY DO WE THINK SO LITTLE OF OUR KIDS THAT WE HAVE DENIED THEM A LEVEL-PLAYING FIELD TO COMPETE WITH OVERSEAS BUYERS WHO ARE WILLING TO PAY MILLIONS FOR A SHOEBOX?

    WHAT A SELFISH BUNCH OF GREEDY SELF-SERVING INDIVIDUALS THAT ADVERTISE TO OUR YOUTH HOW LITTLE THEY CARE ABOUT THEM.

  13. I gotta laugh at everyone who blames ‘foreigners’ for their own plight. It would be a yawn if it didn’t remind me of Europe in the 1930’s. How about pointing the finger at Australian banks who are willing to lend ever-increasing, ridiculous amounts of money to……. wait for it….. locals!

    • The anger should be directed at the banks, but mostly at the government because governments on both sides have implemented policies that have inflated this housing bubble.

  14. @rich42

    We’re dealing with both incompetence and vested interests at the same time. I don’t believe the issue is big Australia vs small Australia. It’s about lack of vision for the future and pure incompetence. If the plan is to bring in more people (which seems to be the case), then we should have planned better for that. Better infrastructure, more cities, more spread out housing connected with better transport, better environment for entrepreneurs so that new jobs are created, better tax system. I would hate to compare us to the US, but at least in the US, you don’t have to compete with foreign investors when you buy your house, and you don’t have to compete for work with cheap labor brought in on 457 visas (US work permits are more difficult to get and are more regulated). We lack true competition in basic products and services and our banks are taking us for a ride. The truth is that we’re going to be left behind because while other countries are looking forward and planning and investing in the future and the right technologies we’re stuck in the past and putting our money and our sweat into non productive assets because we’re too dumb to know any better. Let’s stop blaming the politicians because after all we’re the ones that put them there.