Chinese “frustrated” at foreign owners debate

By Leith van Onselen

Wayne Tseng, founder of the Chinese Chamber of Property Investors, which represents Chinese property investors – both local and foreign – has raised concern at the blame being heaped upon Chinese investors for inflating property values and pricing-out locals. From The Herald-Sun:

Mr Tseng said members of the community felt “frustrated” at the current debate around foreign investment and accusations that they were responsible for rising property prices, and that their voices weren’t being heard.

“A lot of the ruling public sentiment is that [Chinese] are the ones pushing up prices, but in all honesty it’s only in defined pockets,” he said.

“What we do know is they are purchasing new developments, and their investment funds these developments, and the stamp duty that gets charged off each purchase goes to fund infrastructure.

“In a way they do feel a bit frustrated that they don’t have a voice.”

Let’s be honest. The angry reaction against Chinese investors has arisen because of the complete and utter failure of Australia’s foreign investment regime to prevent illegal purchases of pre-existing homes. Zero official data has been collected on the residency/visa status of property sales, and zero prosecutions or divestment orders took place for eight years, despite widespread anecdotal evidence of illegal foreign purchases.

As revealed by NAB’s June quarter Australian Residential Property Survey, which is the only source of data available, foreign buyers – mostly from China – accounted for around 10% of established home sales nationally in the June quarter, with Melbourne and Sydney most affected:

ScreenHunter_8437 Jul. 21 13.03

Given that Australia’s foreign ownership laws generally preclude non-residents from purchasing established homes, it stands to reason that significant illegal investment is taking place, thereby helping to push-up home values.

To make matters worse, both the the Paris-Based Financial Action Task Force (FATF) on money laundering and the Australian Transaction Reports and Analysis Centre (AUSTRAC) have found that Australian real estate is a haven for laundered funds, particularly from China. This view is supported by other notable “experts”, as revealed by Fairfax’s Michael West recently.

The solution is simple: fix the the monitoring and enforcement around foreign investment, along with the Australia’s anti-money laundering laws, and residents’ concerns and accusations about illegal real estate purchases will disappear overnight.

In the meantime, Wayne Tseng would help his cause if his Chinese Chamber of Property Investors website actually included explicit statements informing Chinese investors that it is illegal to invest in Australian real estate without 1) Australian residency, or 2) prior FIRB approval, along with providing an overview of Australia’s foreign investment regime. Nowhere on his site can I see such disclosures.

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Comments

  1. “What we do know is they are purchasing new developments, and their investment funds these developments, and the stamp duty that gets charged off each purchase goes to fund infrastructure.”

    Although I agree that many of the new CBD developments are possible only from foreign funds, I disagree vehemently that they contribute much beyond the construction phase. Particularly in Victoria, they pay next to zero stamp duty due to off-the-plan concessions (as they only pay duty on the land component of their purchase, which is probably only 5-10% of the total purchase price in high density areas). The owners also wont pay land tax either (unless they own >10-15 of them, which would be a small minority) as its taxed on unimproved land value, not capital improved.

    • Good point about unimproved value and land tax Ken. I hadn’t thought of that. Does anyone know roughly what the unimproved value of a high rise apartment is? We need a different (higher) land tax scale for foreign nationals that starts at an unimproved valuevalue of $1.

      • Land tax works a treat on apartments. Think about it. Land value is market price minus construction cost. Those inner city sites are worth a bomb and a quality land tax regime would capture part of that.

        Treasury recently calculated land tax has negative deadweight costs (a truly remarkakable tax) as revenues raised from foreign and domestic landowners is spent entirely on domestic households.

        Tighten up this regime and foreigners will have little incentive to buy here, or if they do will be subsidising Australian HEW.

        Australian have always voted for low taxes and high services. Here is a beautiful way to square that circle.

        Oh, and valuers have at least seven ways to calculate current land values so that is no barrier.

        Don’t Buy Now!

      • I had an apartment in a (very) low density block, where the unimproved land value was about 15% of the capital improved value. For apartments in sky scrapers, you’d be luck to have 5% of your value locked away in unimproved land.

        Take a look at the tax implications (ie. in Victoria)
        Stamp duty on completed $500k apartment = $25,070
        Foreign duty surcharge = additional $15k, if your accountant cant get you out of it.

        However, because these apartments have to be sold prior to construction (banks typically require >80% sold before finance is given), then you’re likely to receive the off-the-plan concession. On such blocks, this typically decreases your dutiable amount by ~95% (as you’d be lucky to own $25,000 worth of land on a $500,000 dogbox apartment).
        Stamp duty (inc. off-the-plan concession) = $350 (that’s not a typo. It’s a 98.6% discount on your tax bill)

        Land Tax only kicks in at $250,000 worth of aggregate land holdings, so you have to own 10 of these (worth $5 million in total value) before you even start paying land tax a single cent of land tax.

  2. Dear Mr Tseng, We share your frustration at the lack of govt action on this.
    50,000 purchases by foreign nationals of existing Australian dwellings
    7915 approved by the FIRB
    Zero prosecutions

    • Dear Mr Tseng,

      Please do not worry. I still blame the boomers, then Gen X and then the Chinese.

    • Mr Tseng, do not worry at all. Australia will go nowhere without Asian.They should think how slow they are to release land for developments rather than blaming. Suggest them to release faster than being very slow. Rezoning land in city will make crowed and extensive city. Australia need strong economy, they should not be stopping anyone who are paying huge amount on tax and stamp duty.

  3. Even though I am frustrated that I’m being locked out of first home ownership I know where to lay the blame.

    The blame falls squarely on the government and its elected agencies not the purchasers. Of course if the government fixed the supply side issues that would help too.

    Limiting foreign investors to new builds would kill two birds with one stone. Would be good if our government actually enforced its own rules though (unless you are an UberX driver then it does).

    • Absolutely right, it is the government to blame. Any criminal would use the lose and uninforced law and regulations to banefit from them. Chinese are not different, they can launder as much money here as they would like to. “We are opened for business.” – some idiot said, and I cannot remember who he was, of cause.

    • Agree 100%, it’s the government (both parties) to blame! Mind you the average man in the street will only blame the Chinese given recent MSM coverage

  4. Just in:

    Australia Building Approvals (MoM) Jun: -8.2% (exp -1.0% prev 2.4%)
    Australia Building Approvals (YoY) Jun: 8.6% (exp 19.5% prev 17.6%)

    You’re clients are slaking off, Wayne.

  5. “In the meantime, Wayne Tseng would help his cause if his Chinese Chamber of Property Investors website actually included explicit statements informing Chinese investors that it is illegal to invest in Australian real estate without 1) Australian residency, or 2) prior FIRB approval, along with providing an overview of Australia’s foreign investment regime. Nowhere on his site can I see such disclosures.”

    Indeed, it’s curious that they have an entire section on buying established property, but nothing to suggest that doing so may be illegal:
    http://www.chineseinvestors.com.au/buying-property/research-types-of-property-to-buy/

    It’s also very interesting given their emphasis on Australia being “a country with the rule of law” and that “to ensure harmony, prosperity and crime prevention, there are a number of laws which govern the process of buying, selling, settling a property”.

  6. “A lot of the ruling public sentiment is that [Chinese] are the ones pushing up prices, but in all honesty it’s only in defined pockets,” he said.

    Foreign investors are not the sole cause of rising prices, but looking at these pockets in isolation is silly. If foreign investors crowds out local investors or home buyers from one area, they will be pushed into another, moving up prices elsewhere.

  7. I’m not exactly sure why foreign property owners- whatever their country of origin- feel they have a right to any sort of representation here.

    • Well the organization defines itself by ethnicity, not by country of origin. It’s quite common in Australia to have various organizations related to ethnicity, particularly to promote cultural and business ties. This organization is no different, except it’s focused on property investment, which makes sense in this country given the preoccupation in economic and social order.

    • You pay your money, you can have whatever you like.

      http://www.smh.com.au/federal-politics/political-news/labor-to-pay-back-donation-to-fund-polling-in-former-pm-kevin-rudds-seat-before-election-20140319-353lu.html

      ‘The Labor Party will refund an allegedly illegal $200,000 donation that was used to fund polling in former prime minister Kevin Rudd’s Queensland seat during last year’s federal election, according to a report.

      The donation was allegedly paid to Labor’s Griffith branch bank account by Taiwan developer and former banker Kung Chin Yuan on September 3, The Australian reports.’

      Both sides are just as complicit.

    • The word resurrect implies that racism and xenophobia were absent , or at least dipped, in Australia at some point in time.
      When was that exactly and for how long?

      • Very few Australian (especially among property speculators) is complying with rules of law because of regards they have toward our legal system but mainly because of penalties they may face. In fact local property speculators are disregarding rules in many ways as well, trying to minimise tax and make more money. Just think for a moment how many Australians you know who bought investment property and pretended to be living in it for 6 or 12 months to get FHOG or CGT discount? Why there is no outrage against these people? That behaviour pushed houses prices up probably more than foreign buyers.

        People should blame Australian policy makers that are surprisingly white, with only one asian person in parliament.

      • doctorx, you’re right that people try to rort CGT and FHOG grants, but each state revenue office has compliance programs to actively seek out people dodging the rules (i.e. cross checking your water bills, for instance, to see if you’re actually using your ‘principle place of residence’).

        btw, minimising your tax bill (i.e through negative gearing) isnt illegal. However, tax avoidance is. Very different

    • Fabian AlderseyMEMBER

      Hmm. What’s your definition of “much”? I don’t think the word means what you think it means.

      • “much” is exactly what it means. House prices are clearly driven by ever increasing investor debt provided by Australian banks so that “much” that resurrected racism is just coming from few media stories and barbie small talks.

      • doctor X. Are you blind? Have you not read the FATF report warning about Chinese money being laundered through Australian homes? Have you not seen the NAB data showing 10% of established sales going to foreigners? Have you not read the O’Dwyer parliamentary report, which found Australia’s foreign ownership rules are not being monitored/enforced, along with the collection of zero official data?

        Sure, foreign buyers are not the only cause of high house prices. Nobody said they were. But they are a driver nonetheless. Why do you continue to support illegal activity?

      • I’m not supporting foreign property ownership, in fact I would quickly fix that by only letting citizens and permanent residents to buy with money they proved being legal.

        At the same time, I’m against labeling every single person of a certain skin colour as a criminal that makes our children poor. If anyone is making our children poor that’s Australian rich banking class, that created the system in which a handful of wealthy individuals have more wealth than millions of young and poor people.

        we should start thinking about real problems not distract from real issues.

      • “At the same time, I’m against labeling every single person of a certain skin colour as a criminal that makes our children poor”.

        Since when have I, or anyone else, labelled “every single person of a certain skin colour as a criminal that makes our children poor”. Stop making straw man arguments. And stop playing the race card.

    • You are the one raising xenophobia and racism, cowboy. The base of this debate is the creation of a global absentee rentier class and the doctrine-locked government’s failure to enforce existing law.

      I am interested in investor motivation and intent, not the color of their skin.

      • the outrage against property buyers is overwhelmingly against certain skin colour, despite the fact that more than half of properties are actually bought by non asian buyers.

      • Again, stop playing the race card, Doctor X. The argument here is about offshore money – often illegal (according to FATF) – purchasing established Australian homes in contravention of Australian laws.

        As for “more than half of properties are actually bought by non asian buyers”, where is your proof? And don’t give me data from the FIRB annual report, which only includes applications, not actual sales, as has been proven to be highly defective (just as Kelly O’Dwyer).

      • Schadenfreude

        What is it going to take, burning Chinese flags and images of Chairman Mao in Glen Waverley
        and see they get the message back in Beijing.

      • rules are very similar for you to buy in china as to chinese to buy here
        it’s a bit easier for you because their bureaucrats are a bit cheaper and easier to bribe

      • Ronin8317MEMBER

        A foreigner buying property inn China is like the song ‘Hotel Carlifornia’ : you can check out anytime you like, but you may never leave. Buy, yes. Sell, good luck!!

      • Nathan (and DrX, as you should know),
        You cannot buy land in China, you only get a 100yr lease, the land ownership always resides with the state.

      • all land in Australia is crown land as well, the only difference is that lease here is “evergreen” until government decides it want’s it back.

        99 year lease or what we call ownership – there is no difference at all

  8. Dear Mr Tseng,
    Unfortunately, as you may be aware, our Government has allowed complete regulatory failure in this sector. We are concerned that thousands of your members clients may be unknowingly breaking Australian law and have spent billions of dollars on unapproved and illegal transactions.
    If you want to assist your clients please write to the Mr Joe Hockey and ask him to urgently audit the land title register and enforce our FATA laws so that your members clients can then have confidence that they are going about their business lawfully.
    Have a nice day

      • Ronin8317MEMBER

        It’s a bit more complicated than that.
        Formally, there is no private property ownership of land in China. Instead, you lease the land for 99 years, and an expectation that you can continue to lease it. A foreigner living in China for over 1 year can legally ‘buy’ a property and lease the land its on after filling in a lot of forms. However, things can become very interesting when you try to sell it.

  9. Ha ha ha! These clever Chinamen have one over on you fat stupid drunk Aussies. Now that you’ve joined your economy to theirs at the hip, within a few years the guest will be trading places with the host. And you will welcome them to do so out of short term greed. You can already see how the government bends over to accommodate illegal Chinese money; just wait until they have some effective lobbying in place!

    Australians deserve what is coming to them. Ha ha!

  10. Schadenfreude

    “In a way they do feel a bit frustrated that they don’t have a voice.”
    .
    That voice would require a translator for a start going by the experiences I have had.

    In all seriousness, what right do they have to a voice any opinion if they are not Australian citizens anyhow… This country is a f**ken joke, sold out by our corrupt politicians (used car salesmen).

    • BubbleyMEMBER

      The consumer has more protections from used car sales than it does our politicians.

      We cant even sell them if they are lemons.

      • St JacquesMEMBER

        WELL SAID!
        (But then again, did anybody expect better from this mob of mongrels? C’mon, fess up. The games up!

    • Politicians that were elected in a land-slide in order to ‘stop the boats’, and because Labor just ‘had to go’. You had to ‘ditch the witch’, remember!

      This is 500% Australians’ collective fault. The fat lazy drunk stupid self-entitled nation of Australia has no-one to blame for this but itself. You could enforce your own laws, but noooo! Those laws only apply to Uber drivers.

      So now you can suck it, Australia. Ha ha ha ha ha ha ha ha!

      • BubbleyMEMBER

        You’re right Dudley, on all counts, but gloating is a very unattractive attribute.

        Australia did vote for them and the punters realised they had a made a mistake within 6 months of the election – remember the March In March protests?

        We need the blue voting block, the 65+ age group that are the Libs main supporters to realise that the party they have voted for all their lives is not the Liberal party of their youth, that it has been hijacked by self interested, vanity driven sociopaths.

        I live in hope.

  11. BubbleyMEMBER

    The Chinese are frustrated by it?

    Why? Because Aussies are finally getting pissed about it?

    Why does he think he’s entitled to an opinion? More importantly, why does his opinion about an internal Australian policy matter?

  12. This article was designed to elicit a certain response. Once that response is given, the RE industry will play the ‘racism’ card.
    Best ignore these traps and continue to address the policy makers and their policies.

    • St JacquesMEMBER

      When the rule of law ceases to exist, then money and might becomes right. Lord Duds is right. We voted fpr gpvernmemts out of greed, and because of that greed we’re selling out our country to maintain a standard of living far higher than is deserved by dirt diggers, tradies and greedy, subsidised speculators, and now that we’re being outbid and pushed aside on what we thought was our home turf, we’re becoming enraged.
      I said this was going to happen, but it seems to be happening faster than I was expecting.

      • SoMPLSBoyMEMBER

        It’s a great effort UE and I suspect the effort WILL pay off eventually.
        Seems to me, same as cricket. There will be no ruling on a suspected LBW, unless an ‘appeal’ is initiated. I see your arm ( and index finger) are in the air presently.

  13. Terror Australis

    Just out of curiousity, are non-resident Kiwis allowed to buy established dwellings in Australia?