In what is becoming an increasingly regular occurrence, Fairfax has reported yet another epic failure of Australia’s compliance/surveillance regime governing sales of existing dwellings to foreign nationals, which failed to prevent the sale of one of Australia’s biggest trophy homes. From The AFR:
The mystery owner of Australia’s most famous trophy home, Altona in Sydney’s Point Piper, is a Chinese property developer who concealed his investment behind an elderly Melbourne couple to avoid foreign investment laws.
Fairfax can reveal that businessman Wang Zhijun paid $52 million for the harbourside mansion through a complex holding structure of shelf companies and holding trusts, including opaque nominee arrangements stretching from the Melbourne suburb of Elwood to the British Virgin Islands.
The revelation solves the most talked-about riddle in Australian real estate, but raises major questions about the growing tide of offshore money washing into Australian real estate…
On Tuesday lawyers for Mr Wang’s interests took Fairfax Media to the Victorian Supreme Court in an unsuccessful attempt to prevent publication of this story…
Some readers may try to argue that sales of expensive trophy homes to foreigners are not a major concern, since they don’t affect broader housing affordability. But if hugely visible sales Altona can escape the regulatory net, then imagine how many sales of ordinary established homes have also gone through without the knowledge of the Foreign Investment Review Board?
As noted yesterday, an ATO data matching examination of 950 “sample” sales records “identified sufficient high risk cases warranting further action”, suggesting there is a lot of illegal activity going on. The ATO is also now reportedly investigating 195 possible illegal purchases by foreigners, which has presumably come from the above 950 sample.
Apply that ratio to every last purchase of real estate by foreign nationals and there is a massive problem – and a major political issue.
Ultimately, the only way to deter illegal purchases of established homes by foreigners is to put some ‘heads on pikes’. That is, there needs to be a significant number of prosecutions and punitive penalties for both buyers and third parties that assist with such sales, so that skirting the law becomes too risky.
Otherwise, foreigners will continue to launder money through Australian homes, pushing home ownership out of reach of young Australians.
A good place to start would be to conduct an audit of all property sales over the past two years to identify and punish the illegal sales of existing homes to foreign nationals, which could number in the thousands.
