Illegal Asian buyers raise ghost house fears

By Leith van Onselen

The Australian published an interesting article over the weekend claiming that around 4,000 homes purchased by Chinese-based investors over the past two years are being kept empty, often leading to over grown lawns and dereliction across Australia’s suburbs:

MacroPlan Dimasi chief economist Jason Anderson expects a further 10,000 new homes bought by ­Chinese buyers over the next five years to be left vacant.

Century 21 Australia chairman Charles Tarbey said that the amount of vacant homes — which was about 8 per cent at the last census in 2011 — would increase as foreign investment did…

Mr Tarbey said. “A lot of them don’t rent out the apartments — they just buy for capital gain. They can afford not to have $50,000 a year of rental income”…

Buyers’ agent David Morrell ­alleges that many vacant homes have been bought illegally by non-residents. “When you see a 24-year-old girl buying a $4m house you go, please, something’s not right,” Mr Morrell said…

ScreenHunter_8277 Jul. 13 07.49

Meanwhile, the Murdoch dailies yesterday ran an article lamenting that nobody knows how much foreign money is being ploughed into Australian homes:

…a major loophole in the law that means although overseas investors are meant to seek approval from the Foreign Investment Review Board, no government agency routinely checks whether they have done so or matches up all registrations with actual purchases…

The lack of oversight is despite the fact government agencies know some foreign buyers are breaking the rules by not declaring their investment…

President of the Real Estate Institute of NSW, Malcolm Gunning, said: “We have never been contacted by any government agency.”

Mr Gunning’s business, Gunning Commercial at Hurstville, is the major agency selling property to Chinese buyers.

“We ask foreign buyers the question if they have FIRB approval but it’s not up to us to police it.”

He added: “A lot of hoo-ha is talked about this issue and it feeds a lot of xenophobia, but we have no real numbers to go on. We have been trying to get figures but, strange to say, there’s not much data around at all.” Mr Gunning said feedback from his members showed a high level of public concern.

It is important to highlight, once again, that non-residents are meant to be barred from purchasing pre-existing Australian homes, whereas temporary residents are required to sell their Australian homes within three months of departing Australia.

Clearly, from the frequent anecdotal evidence presented in articles like the ones above, Australia’s foreign ownership rules are being flouted with regular occurrence.

My own discussions with real estate agents and residents in Melbourne’s eastern suburbs (where I live) suggests that there are a large number of illegal sales of existing dwellings to Asian-based investors in suburbs like Balwyn, Balwyn North, Mount Waverley, Glen Waverley, Doncaster, Box Hill, Ashburton and Glen Iris.

I have also heard multiple reports of homes being left empty, particularly in and around Balwyn – a phenomenon that obviously subtracts from effective housing supply, whilst creating eye-sores for local residents.

We should also not forget that 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 suggests that large sums of money are being laundered through our suburban homes.

Meanwhile, prices are rising to ridiculous levels, pricing younger Australians out of home ownership and preventing them from living near where many grew up.

If the government does not quickly fix the monitoring and enforcement of foreign investment, along with the Australia’s anti-money laundering laws, then residents’ concerns and accusations about illegal real estate purchases will continue to escalate, leading to a back-lash against new law-abiding migrants who wrongly get accused of driving-up home prices and pricing-out their children and grandchildren.

It’s an unfortunate situation that is in nobody’s best interests, and highlights the urgency of fixing the foreign investment regime.

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Comments

  1. I’m surprised that we don’t hear reports of squatters moving in to illegally-owned vacant homes. They would seem to be the perfect squats in many ways – vacant for months or years on end, neighbours who might turn a blind eye as long as the lawns get mowed regularly….

    • PantoneMEMBER

      Not to mention the owner might get in hot water if they try to prove ownership.

      • What’s the bet the squatters would be caught and prosecuted whilst the illegal purchasers get off scot free?

      • Squatting isn’t illegal.

        How are you going to catch anybody doing anything if you’re not here to check on your property, especially if you don’t have the good will of your neighbours?

    • StomperMEMBER

      Someone should set up a squatters web site – listing properties available with vacant foreign landlords.
      Might be able to easily solve our homeless problem!

      • Excellent idea. I see vacant homes all over the place. Do a title search on these places, and if owner is Chinese sounding, then he/she is probably not in Australia. Occupy and squat!

      • dennis,

        If your name is on the Certificate of Title then you are the owner.
        Unless there is a mortgage also on the piece of paper, then you are a debt-slave with your name on multiple pieces of paper.
        But until the law is enforced Mr & Mrs SuitcaseFullofMoney are the disinterested owners of the empty house/apartment.


      • But until the law is enforced Mr & Mrs SuitcaseFullofMoney are the disinterested owners of the empty house/apartment.

        Unless someone lives in it for fifteen years OR

        Someone living it for an extended period shorter than fifteen years thinks they can prove that the most recent sale was invalid.

    • Give it time. Squatters might not read the Australian but this story will be picked up elsewhere and they’ll start looking around those suburbs.

      • You guys make it seem like suqatters are hobos. Distribute this to the youth generation who are looking to buy. Why bu ywhen you can live rent free nad then acquire the place!

    • You guys make it sound as easy as walking through the (unlocked) front door. Just cause nobody’s inside doesn’t mean they don’t have locks and security alarms…

      • The squatting guide posted above has details on how to get through/ past and subsequently change the locks. Apparently “Getting inside…may be the easiest part”

        Alarms may be more difficult, but not every property will have an alarm, and if they’ve left a long time, not every alarm may function.

    • Does Australian property law feature adverse possession? The US has it, this would be an easy case.

  2. Schadenfreude

    The house opposite my parents in Glen Waverley has apparently been vacant for 3+ years.

    Strangely enough I don’t think the owner is Asian, but just the same it is crazy to think how
    much stock could be sitting vacant right now… If the domino’s start to fall then all this stock
    will be revealed and only compound the problem as people rush for the exits…

  3. The Patrician

    Lets be very clear.
    Kelly O’Dwyer failed.
    She failed to get the data.
    She failed to require proof of the purchasers FIRB compliant residency status to transfer the title.
    That’s a double failure

    • ErmingtonPlumbingMEMBER

      Yes but the Libs got Shorty on undeclared political donations, So you you gota give em some credit.

      Royal Commissions are a bit pricy though, did they “get” anyone else?

      • Mining BoganMEMBER

        Well, they got a massive own goal with our Tony’s hero, Kathy Jackson.

        Should count for something, even they they don’t talk about her much anymore.

  4. NZ Institute’s Eric Crampton says council decisions around land use are contributing to poor productivity performance and are destroying real value for little gain | interest.co.nz

    http://www.interest.co.nz/opinion/76486/nz-institutes-eric-crampton-says-council-decisions-around-land-use-are-contributing

    By Eric Crampton*

    It’s always a bit tough reporting on the New Zealand Economics Association annual conference. Not because the papers are filled with opaque mathematical theory, or because speakers were less than lucid – neither of those are true, for the most part. But the conference is held under Chatham House Rules. … read more via hyperlink above …

  5. This is the perfect situation for Abbot. Demand for houses keeps going up as all these ghost apartments spring up providing jobs/money to take the supply constrained bubble-higher!

    • Demand may appear to go up, but if it becomes more widely know that these houses are idle and their owners are on the other side of the world, people will start to realise that there is housing available for free. That’s the end game here.

  6. If squatters start using these dwellings it will be a brilliant sort of communist housing pressure relief valve, whereby housing is provided without any money needing to change hands. Hopefully that’s what happens.

    • Squatting might become very attractive to the homeless hordes created by the current situation.

  7. Government and urgency, surely you jest. Unless it involves claiming taxpayer cash, they aren’t interested.

  8. Will it really take a escalation (abuse, violence, etc) before gov does something? Not sure how long law abiding citizens will tolerate criminal behaviour costing them & their children dearly, whilst government does nothing beyond words whilst the PC crowd cries “racist” because a nationality is mentioned.

  9. The Patrician

    “..claiming that around 4,000 homes purchased by Chinese-based investors over the past two years are being kept empty,”
    What is the data source for this claim?

  10. More than 4,000 I lived in a main street in Castle Hill for two years and there were three down our street including our next door neighbour (Chinese) with all the reasons for doing it cited above above (I think tax avoidance as well)

    • azxylonMEMBER

      I don’t like the term “racist” either. An overused “buzz” word. Maybe we should use the term “cultivar” instead. Doesn’t seem to create any brouhaha when applied to plants. In fact, I’d say that it’s a positively non-offensive term; cultivars are prized amongst the exotic plant-owning community. Look at gladioli for example. And the term has even been extended to encompass some of our own native plants. How Strayan is that? So quite frankly, I’d reckon that any tru-blu Strayan would be proud to be called a genuflecting “cultivar”.

    • ErmingtonPlumbingMEMBER

      Did a job for a Korean Ex General in his 70s or 80s last week at Killara, a lovely fellow who always wants to tip extra in cash.

    • DarkMatterMEMBER

      That link shows exactly when the house in the photo was last sold. It is obviously the same house – it just looks s lot better in the RE sales photo.

      How hard would it be for someone to lookup the details of the sale – surely not hard for FIRB.

      Anyway, it turns out that that house is down near the golf links and it is where my son walks the dog. He saw the photo and immediately recognized it. We just did a quick google and it popped straight out. There are quite a few like that around here in the leafy northern suburbs of Sydney.

  11. Actually, squatters not required – just need ice addicts looking for a private spot or bored teenagers looking for somewhere to do teenager stuff away from parents – including breaking stuff/ practicing grafitti tags.
    Of course, if someone under age breaks into your house, and breaks their leg, you could be in legal hot water for not securing the place sufficiently to keep them out. Leaving houses empty for months/ years is just asking for trouble, ultimately.

  12. So here we have a claim that 4000 houses have been purchased over 2 years and kept empty. Clearly if this is true it will be contributing to the shortage of affordable available housing faced by Australians and our many immigrants who need something to actually live in. Also it creates a potential supply of 4000 houses should the ability to keep them empty be lost.
    Are you still with me?

    Now we also can find data that each year Australia has 200,000 to 400,000 extra people via our government’s immigration policy.
    Can someone tell me if the 4000 empty houses are significant when compared to immigration?

    • Based on current occupancy levels (although, if they were occupied by squatters sometime in the future, those houses might be able to house people at a much higher occupancy rate), 4000 houses is housing for about 6% of last year’s NOM of 180k, which actually does seem significant.

  13. http://www.watoday.com.au/business/china/chinas-rich-seek-shelter-from-stock-market-storm-in-foreign-property-20150712-giahsl.html

    “As China’s equity markets face another roller-coaster week realtors in Australia, Britain and Canada are bracing for a surge of new interest in their already hot property markets, with early signs that wealthy Chinese investors are seeking a safe haven from the turmoil in Shanghai’s equity markets.

    At its low point last week the Shanghai composite index had lost 32 per cent from its high point in mid-June. The market clawed some ground back late in the week but investors remain nervous and government attempts to slow the slide have largely failed.

    Ed Mead, executive director of realtor Douglas & Gordon in London, said his firm had seen two buyers from China looking to buy whole blocks of flats.
    It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money.”

    Good thing we have rules to protect us.

    • Firstly there is no such thing as – race – and utilizing it leads to all other kind of unintended consequences, tho with something as fundamental as RE it should not be treated like a pile of gold.

      Skippy…. Milton Friedman’s business relationship with the developer industry had its seemingly good moments, but now suffers the endgame of that paradigm.

    • If you are serious about getting the government to enforce the Foreign Takeovers Act wrt residential property, the worst thing that could happen is that hardcore racists – along the lines of the Reclaim Australia crowd or one of our homegrown White Pride groups – hijacks it and makes it politically impossible for anyone in power to put the laws into action any more.

      • The Patrician

        Which is exactly why the spruikers are running this red herring as hard as they can.

    • If there ever is a poster boy (girl) for useful idiots, it’s the readers of dailylife.co.au

      That sh*t kills more braincells than rohypnol.

  14. kiwikarynMEMBER

    If non-residents buying existing property is a crime, then the Govt can seize the houses under the Proceeds of Crime Act. That would be amusing. Its one way to acquire an immediate stock of public housing without spending a cent.

    • It would also frighten the horses very considerably. Which may make the government be wary of taking that step.

    • The Patrician

      Any unapproved sale of an existing dwelling to a foreign national is illegal and invalid.
      The govt land title offices are registering thousands of unapproved, illegal and invalid transfers of title.
      This is the real sleeper.

    • If you did it for 15 years you’d own it.

      If someone tried to evict you, you strongly suspected it was an illegal purchase and you had some evidence to back it up, you might be able to use that to slow the process down or even stop it, which could assist you in reaching 15 years, if it wasn’t too far away.

      • Sounds like the solution to the housing crisis, find illegally purchased homes. Squat, own repeat. 🙂 Maybe Gen Y and Millennials have a chance at owning their own homes yet!

      • It would certainly be truly awesome if we took the O/S investors money, and then an Australian ended up owning the asset bought without giving any cash back to the O/S investor.

  15. I don’t care who has bought it (unless the laws been broken), if they’ve bought it they can choose to let it sit empty. Same as it is my right to let it my house sit empty if I so wish. Saying otherwise is crazy.

    Also, FIRB buyers who plan to knock down/rebuild are not allowed to rent it out, not even if the lease is given to the party who’ve sold.

    • That’s not true in the US, where owners of ‘blight and nuisance’ properties have been successfully sued when their properties began to attract crackheads and vandals.
      No particular idea about the law here, but I’d imagine that if a house like the one in the picture, with overgrown grass, or one with uncleared rubbish caught fire, and the fire damaged neighbouring properties they’d be in the poo.

      I’d guess that if a lawyer was going to sue the owner of said property, part of the process would be establishing the identity of the owner, and their assets in order to establish the potential for suing them. That seems like a step which could easily lead to an illegal transaction or two being discovered.

      They can choose not to occupy it, but failing to check on the property opens them up to all kinds of problems.

    • So why sell off property to a foreigner if it does not add to supply… Or even decreases it! Foreign investors MUST be made to rent it out, else this fails the national interest.

    • I understand the proposed amendments to FIRB is that knockdowns are now disallowed if the dwelling is habitable i.e. nearly all of them i.e. encourages greenfield additions to supply or multi-dwelling highrise (typically from non-residential parcels) thus actually adding to supply (or neutral if kept vacant)

  16. With reference to Rich above, I note that the City of Detroit has begun to confiscate disused and dilapidated properties in order to combat urban blight – with no hint that the owners are not entitled to exert their rights as owners (more that rights come with responsibilities)

    http://detroit.cbslocal.com/2014/04/10/detroit-to-sue-owner-of-every-single-abandoned-house-in-fight-vs-blight/

    http://www.freep.com/story/news/local/michigan/detroit/2015/03/31/detroit-blight-lawsuits/70695200/

    Too many of these unoccupied properties start inhabiting Australia, I imagine that’ll start happening here also.