Chinese crackdown signals Australian prestige property crash

There are multiple headwinds developing for property but this story yesterday at the AFR has only one cause:

A large house in a prestigious, leafy Melbourne inner suburb that was last year sold for more than $7 million has dropped in value by more than $2 million, or 28 per cent, highlighting a sharp downturn in the Melbourne market that until recently continued to hold its value as prices plunged in other state capitals.

The four-bedroom, two-bathroom house on a 1210-square metre block, which is close to some of the state’s most prestigious state and private schools, was passed in on Saturday for $5.6 million, having been sold last November for $7.8 million.

Two years ago this was a nearly exclusive Chinese segment of the market. Then China slammed shut its capital account to prevent the yuan falling and this happened:

From 2011/12, Sydney and Melbourne prestige property priced itself upwards for elite Chinese migrants seeking a distant bolt-hole. They didn’t care what they paid and they had plenty of dough. But they’re gone now and the local prices that they produced have no indigenous buyers.

Moreover, it’s about to get a lot worse. The CNY is still falling and the pressure upon it mounting as it responds to US tariffs via monetary easing. As it does so, China has no choice but to tighten its capital account even further to prevent capital flight becoming a self-fulfilling prophecy. To wit, from the AFR today:

The State Administration of Foreign Exchange earlier this month published a list of 20 irregularities, which included four related to property deals, in a move designed to send a warning to investors it said were trying to get money out of the country through networks of “underground banks” or illegally pooling individual currency.

…The decision to publish the cases, which involved millions of dollars in fines, is seen as a warning that the government is less willing to tolerate what is considered a grey area in the country’s capital control rules. Liu Xuezhi, an economist at China’s Bank of Communications, said this showed Beijing’s crackdown on offshore commercial deals was being extended to individual investors.

“The government regulation on foreign currency is becoming more thorough. They are extending supervision from corporates to individuals,” he told The Australian Financial Review.

“The tight control on foreign capital will be maintained for the next one or two years. This would bring an impact to the Chinese investors who are planning to buy properties overseas, including Australia.”

Indeed. This is a disaster for Sydney, Melbourne and Perth prestige property. Expect a rolling bloodbath with no end. Cold War 2.0 has only just started, likewise for the tightening of the Chinese capital account.

The inflows should never have been allowed. They were always going to reverse. But Aussie greed around property has no boundaries and now everybody will pay.

David Llewellyn-Smith
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Comments

  1. So how does Mr Chinee return to China and advise the CCP that they, individually, have lost 500 mill or so of the money of the people.
    We have multi billion losses on for chinee real estate on the GC
    add to that multi billion losses of chinee companies on the ASX.
    and the party is just kicking off??
    HUGE.

      • Maybe not. the qld govt is booting unionists off the payroll
        in favour of more efficient private sector employers.
        Maybe the dirt war against labor is just kicking off.
        seems there is plenty to be spread around
        Interesting times. a collapse in housing, a collapse in the ASX, a collapse in super
        Bank bashing, bankers feared of going to jail. Punters in fear of losing everything
        and very many employees feared of an xtended xmas holliday.
        and then>>> the election.

      • ErmingtonPlumbingMEMBER

        Oh yeah,…its going to be a real poisoned chalice for Labor winning the next election.

        As for Bankers “fearing” going to jail,….don’t be silly WW.

    • I doubt Beijing will clamp down on purchases of Australian property or politicians. The sending of hordes of migrants to our big cities is an easy way to buy political influence in Australia.

      • Perhaps. But the flip-side is capital flight which threatens the Yuan in a big way. I’ll accept the politically connected squirrelling money out of the mainland but for the hoi polloi, not so much.

      • DefinitelyNotTheHorribleScottMorrisonPM

        So not only is the weird mongoose thing sitting around on its ass not working, it’s saying that it has a “human right” to be given a house, and that everyone else is greedy for not giving it free sh1t. This is why mongeese subscribe to MB, vote Labour, and have kids born with congenital syph.

      • “In this country anyone who can make a quick buck is treated as some kind of financial hero genius when its usually just a random idiot with a bank loan”

        “A correction can be both a market slump and a self-righteous punishment..and i’m loving it”

        “debt up the rissole”

        LOLOLOL

    • Strange Economics of cricket and banking.MEMBER

      Ironic to see that the article in the sydney domain paper, directly after the one discussing how the “win at all costs” , group culture, life in a win all bubble, and lack of ethics has destroyed Cricket Australia – not just a “few rogue elements” . This is directly followed by the article wondering why high wealth bankers etc have got a few rogue elements. – and a profits above all culture? And the CA take full responsibility, but in the modern way no one resigns…

      • Watch what occurs to banks and their personnel, when the class action lawyers get started
        IN an extraordinary example yesterday the AFR cut a few ribbons off broker Morgans.
        Things are really heating up.
        you would think some have offered a reward for incriminating info.

      • Strange Economics ?MEMBER

        No more 2% Super Fund Commissions? Property crash at the higher end.
        Remember its only fundies and their lawyers able to pay 3 million dollar mortgages at 150k interest per year? East Sydney and South East Melbourne house price crash if they do that. Chat to peope in the shops in these areas and you find everyones in finance or fintech (fintech: definition thats payday and electronics loans at 25% interest and without govt regulations. even better than banking)

    • If there are any FHBs with an interest in $5mil+ houses, their money didn’t come from a wage, so the balance of their super account isn’t going to make a difference.

      • Mate, you’re just thinking about the wrong timeframe. In 10-15 years, $5m will be a typical price for a starter home.

  2. No problem.

    They just need to improve the quality of our promotional videos for foreign buyers.

    This one tells you more about what is planned for Sydney than our pollies will own up to.

    https://youtu.be/XdKaOKwFc5A

    Plus provide more active assistance to the evasion of Chinese capital controls is important.

    Perhaps we could accept Chinese currency in duffle bags at the Australian embassy in Beijing and then shift it in diplomatic pouches to Kong Kong for coversion to AUD.

    But then we could just ask the professionals in our big 4 banks to get the job done.

  3. HnH, Wondering if you could comment/ post on the relatively recent breaking of the secular downtrend in US 10yr Bond yields ?
    We had falling interest rates since Volcker spat the dummy now it looks as though the reverse is going to happen . Technically it’s confirmed. Fundamentally we have $1T deficits rising interest rates and quantitative tightening.
    As a mate said to me the other day our parents bought property and it went up for 30yrs … it could go down for 30yrs now

    • According to the British journo George Sala who coined the expression “Marvellous Melbourne” in 1885.
      6 years later property imploded, every financial institution in the colony of Victoria was devastated and the Marvellous Melbourne, with its gilded arcades and neo Gothic bank buildings, was plunged into a deep depression that spread across the whole continent and triggered the tensions between labour and capital, leading to the shearer’s strikes and the formation of the Labor Party in QLD to represent the working man.
      Melbourne, filled with beggars and women driven into prostitution became the scene of the most cynical sort of politics and criminality that was immortalised in fictional form, Power Without Glory.
      There were to be 70 years, including of 2 World Wars, a great depression and an industrial revolution in Australia before Melbourne property values regained their 1890s levels.

      • Yes but we did not have a state / private bank cartel back then with the capacity and desire to reflate public money to infinity and beyond.

      • What we did have was the massive gold finds, ballarat bendigo, ararat, charters towers mt morgan gympie
        tennant creek, kalgoorlie, coolgardie etc, huge finds, saved the british empire.
        Now gone.

      • The gold was mostly gone by 1890.

        Australia ground along until the banks lost some power over money to the Commonwealth bank and they have been fighting to get it back ever since….and mostly succeeded. With the improvement of a public guarantee. Just ask our resident marsupial banking shill.

        https://theglass-pyramid.com/2017/06/10/bank-royal-commission-the-wisdom-of-ben-chifley-in-1937/

        Even in the 1930s we worried we did not have enough iron ore for domestic purposes.

      • Gold finds is just 1800s quantitative easing. “Gold” doesn’t make an empire rich.

        Look at the spanish empire – sending back galleons of gold from south america – then look at madrid house price inflation in the 1500s. Massive. They just ended up printing money. Britain benefit from production and trade from its North American colonies. I remember this from I think Niall Ferguson’s book on money but I can’t find his quote – below is a different one but same conclusion …

        “Economist Earl Hamilton argues that prices in Spain rose 300 percent between 1500 and 1600. Part of this reason was the rapid increase in money (then silver and gold) chasing a fixed amount of goods. The consequence was that Spanish exports became uncompetitive in Europe. Instead, the wealthy Spanish imported goods from abroad.”
        https://www.economicshelp.org/blog/7785/concepts/what-happened-to-the-spanish-gold-from-the-incas/

      • Philly
        you left out the part where the Spanish armada nearly knocked off the UK.
        apart from a wind shift

      • “Economist Earl Hamilton argues that prices in Spain rose 300 percent between 1500 and 1600. Part of this reason was the rapid increase in money (then silver and gold) chasing a fixed amount of goods. The consequence was that Spanish exports became uncompetitive in Europe. Instead, the wealthy Spanish imported goods from abroad.”

        That can’t be right. We are told all the time how this sort of thing doesn’t happen with “sound money”.

    • Easily. Just look at Japan – textbook example of that. Zero rates and multiple QEs failed to arrest deflation in property prices for more than 27yrs. Obviously we’re different.

      • Zero rates and QE don’t do much for property prices unless that is where you want the credit to go.

        The Japanese have not tried to rebuild a property bubble and they have succeeded. It’s odd that people think not reinflating asset prices is a sign of failure.

        What they did fail to do was to ensure enough of that money printing got into the wallets of the average Japanese.

        But still for a country that legend has it has been in a coma for 30 years, per capita GDP keeps growing and unemployment is low.

      • To be fair, when you have close to zero immigration and negative population growth, precisely nothing will dig you out of that hole. As to whether the BoJ was ever in control of house prices post-crisis is a moot point. Personally, I’m of the view the the Govt and CBs have far less control than they like to think. Added to which, Japanese banks never allowed a cleansing of their balance sheets which means that the flow of credit (at any price) is naturally restricted.

        But, yes, it is perfectly possibly to grow GDP with a stagnant or falling population — productivity is the key

      • Agree,

        Governments and Central Banks certainly have less control than they think but that is mainly because most of the control is now effectively in the hands of the private banks and they haven’t exactly covered themselves in glory over the last 40 years..

        Which leaves us in a challenging place.

        Perhaps less monetary system lever pulling by all three (Govt, Central Banks and Private Banks) is an approach worth considering.

      • @pfh007

        Perhaps less monetary system lever pulling by all three (Govt, Central Banks and Private Banks) is an approach worth considering.

        When all you have is a hammer, everything looks like a thumb.

      • Phf007. I’ll come clean — I am an unapologetic advocate of sound money. That would cure the problem of privately created credit instantly.

        There are many here who have espoused the view that a fiat money system is perfectly viable so long as appropriate regulation is in place — a view I strongly disagree with. While sound money is not entirely incorruptible it ultimately holds the banking system to account as the amount of gold that is needed to support lending cannot be created out of thin air. In other words, while a certain amount of fractional reserve lending will take place it’ll never spiral out of control because the risk of bankruptcy (a run) is huge and the CBs can only fill ‘gold deficit’ to a limited extent. As soon as the CBs are taken out of the equation it’s everyone for themselves. Gold undermines CBs, which is why they have been desperate to de-monetise it over the past few decades.

        Their failure is a certainty.

      • Strange Economics indeed..MEMBER

        Japan was textbook property bubble. At the peak they sold mortgages for payment by the future grandchildren…

      • Dominic,

        While I am not convinced that it is necessary that public money need be backed by gold (ultimately it is a matter for each country to decide and for some it may be a good choice) I have no problems with private parties setting up private monetary systems backed by gold.

        It is a good thing that there is choice when it comes to monetary systems. The world is full of them and the more the merrier.

        The only thing I am certain is a dud is the model we have now which is :

        1. A cartel between the state (the public) and private banks

        2. A cartel that actively seeks to suppress and eradicate competition (as you have noted with respect to gold and others have with respect to cyber currencies etc)

        3. A cartel that actively seeks to expand beyond the borders of a single country (aka monetary unions)

        A fundamental power of a democratically elected government of an independent and sovereign political community is to issue its own money (just like everyone else can) but that doesn’t mean that a government should be able to enforce a monetary monopoly either… though it is perfectly entitled to require payment taxes in whatever form it chooses and naturally it will have a preference for its own money.

        Hmmm must now be only a matter of minutes before our resident apologist for the state / private bank cartel hops up to claim that the cartel is as natural as mother’s milk and everyone who says otherwise has an ‘agenda’.


      • Japan was textbook property bubble. At the peak they sold mortgages for payment by the future grandchildren…

        Pretty risky for the lender given Japan’s fertility rate, assuming by ‘future’ you mean ‘not yet born’.

  4. I guess we will finally find out why all those houses in my leafy burb are left empty.

    If they’re buying to get a citizenship pathway toehold for themselves and their families then losing a few hundred grand is nothing. But if they bought with mortgages they can no longer service or were planning to sell at profit to the next mainlander sucker then…

    • I think is it a mix. There are a lot who have essentially stolen the cash used to buy. That money is never going back so losses don’t matter.

  5. Nothing that was not predicted on this site going back several years, right in keeping with the parable: “”Therefore everyone who hears these words of mine, and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against the house, yet it did not fall because it had the foundation on the rock. But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.”” Matthew 7: 24 – 27.

    • Ah, Matty of old wasn’t up with this climate change thingy.
      who woulda thought 3/4 of the GC is built on a swamp,
      and that GC property will be literally under water in 80 years??
      Back in Matty’s time history was circular.
      Now we have “modelling”,
      and some are leaving for Mars.

      • Ha ha but isnt history circular now? Its looking like the 1890s land boom collapse all over again.

      • Hey Wiley. I looked at sunglasses yesterday and there was a Wiley X pair, but I wanted a Wiley W pair and they refused lol I’ll bet you have a pair

      • Afund, a story for you
        I have a pair made from shade 11 welding lenses.
        I had them made when I was learning to use a sextant.
        the most incredible sight i have ever seen was when I gave them to my mum and a set of 10×50 biniculars so she could watch the transit of Venus.
        here was a person who had heard all about the planets etc, but to be able to see a planet transit the face of the sun, was absolutely amazing for her.
        Like all these punters asking about the upcoming crash,
        to be actually able to witness one is going to be life changing
        I hope you all are taking good notes.

      • Ww – you don’t need welding lenses to see the miracle that is Australian property.

        It’s basically cold fusion mate. Cool to the touch, but full of eternal energy. Perpetuum mobile.

        Australians are geniuses. The rest of the world should be taking notes about how economic management t through mass human importation should be done. (actually, the Americans did a pretty good and comparable job during the slave age, but the transportation technology and financial technology back then was pretty simple. A slave ship took weeks/months to arrive, whereas an airbus takes no more than a day. And you couldn’t leverage things 10:1 debt:equity, or borrow 8x income. That’s why their boom has petered out, while ours is permanently roaring). …consequently the two-class society that Australia will have as a result of mass human importation will be much more severe than America’s.

      • Wiley, I’ve been taking notes for years. I’d love to do more astronomy and when I have time. I’ll either build or buy a good telescope. I’m going to do a astro photography course as a friend did one and it’s amazing what you can see/do.

    • The ‘losers’ in this will demand compensation from the banks or the taxpayer.

      It’s not their fault after all — all they did was borrow an insane quantity of money in the expectation of getting rich.

      • ErmingtonPlumbingMEMBER

        Many borrowed all that money to simply buy a stable home to raise a family in,…I wouldn’t have had my 2 kids if I was renting, able to be kicked out on a months notice,… the majority of parents in my cohort held the same opinion brfore they had kids.
        Its these kids taxes that’ll be paying for your ar$e washers in the future Dom,…if not they themselves performing that unfortunate task.
        By all means laugh at those money for nothing Speculators,…but try and show a bit of restraint and respect for those that were wanting nothing more to own a stable home for their family.

      • Ermo, I understand perfectly that there will be collateral damage here and I’m sorry for those guys but I refuse to take blame — the blame for this can be placed squarely at the feet of Govt and the central banks who have under-written and supported what is essentially a fraudulent monetary system. To be absolutely clear, without the existing monetary system there would be no housing bubble and houses would be what they were designed for: shelter, not a gambling chip.

        Yes, the commercial bankers are complete c0cks but they are simply exploiting a situation with the blessing of our incompetent, corrupt pollies. Think of it like this: you leave 40 kids in a lolly shop alone and unsupervised for several days, and instruct them to exercise restraint. If we had a monetary system based on sound money the 40 kids would not ever have unsupervised access to the lollies and when they did have any access it would be a few lollies each. Sorry mate, I realise that few on this blog and in society in general understand the role that our fraudulent monetary system has in this debacle but it is front and centre the problem here and something for which I think our elected representatives should hang (or, at the very least, be jailed).

      • But Ermo, it’s these very people who have stupidly enabled he bubble to inflate. These are the people who have prevented sensible people from owning their own home for their own family. All they needed to do was say, Yeah, nah. But they didn’t and here we are. I get where you’re coming from, but you could just as easily say, We can’t blame the bankers for doing what our regulators allowed them to do. We can’t blame the regulators for doing what the politicians encouraged them to do. We can’t blame the politicians for doing what voters wanted them to do. We can’t blame the media for doing what their readers and advertisers wanted. Where does it end? Who takes responsibility? All were involved and all should share the burden.

      • I agree with Remington plumbing. My son and his girlie in training as a respiratory specialist just bought late last year in Brunswick east rebadged as north Fitzroy. They are in their 30s desperate for children, were given 1 month to get out of their rental walking distance to cbd and could not get a rental…huge lists like 200 for homes without mould etc. so bought near top of the market knowing full well re bubble, banks, housing cycle all of it. Huge mortgage, I worry. They are so grateful for own home, grass and dirt and fridge on verandah.and hills hoist.

      • Think of it like this: you leave 40 kids in a lolly shop alone and unsupervised for several days, and instruct them to exercise restraint.

        Conveniently missing from this analogy, are the people – like Dominic – who have insisted on removing all the surveillance cameras, locks and staff to make it is as difficult as possible to stop the children running riot in the candy store (because that violates their rights).

        Instead, they say, we should have as few candy stores as possible, owned by grumpy old cvnts who hate children and only stock Werthers, XXX mints and 90% Cocoa Chocolate.

      • @glo
        … and I don’t dispute that many people would prefer to own when starting a family, however, there are (frankly) tens of millions of people in the developed world who rent (and have kids). The difference between us and other countries is that we’ve come to believe that property ownership is a right, which it isn’t. In addition, I would strongly dispute that owning a property close to the peak of a massive property bubble buys ‘stability’ — quite the opposite, in fact. Personally, I’d be terrified, but I do wish your son and his partner the best (as well as all others who have bought in good faith).

      • @smithy
        Answer me this: why is it that I understand the comments of almost all other commenters on this blog very clearly but whenever I read yours my brain turns to mush and I reach for the paracetamol? It has nothing to do with your status as self-appointed leader of the the New Puritans on this blog, it is something else. Incoherence? Perhaps the fact that you are on such a high intellectual plain you struggle to order a hot chocolate in a cafe and generally function normally in society?

  6. They didn’t care what they paid and they had plenty of dough.

    The rich Chinese immigrants should have tried to stop the mass importation of low-wage plebs.

    The great multitude can not afford to buy a 1210 sqm plot of land anyway. Only high rollers can afford to buy such a plot. “restrict immigration to high rollers”.

    • Mate, the reason why those rich Chinese are rich (and also why being rich is so so sweet in China) is the multitude of low-wage plebs.

      The workers back and the sweat of the workers’ brows.

      • reusachtigeMEMBER

        Indeed. A good supply of poor labourers has made China strong. It is something we lack and I hope we import more of.

      • ErmingtonPlumbingMEMBER

        At least your honest about your despicable nature Reusa,…gotta give you a degree of respect for that.

      • Be funny if Reusa was a single mum working for minimum wage and giving out handjobs on the side to make ends meet. Of course that would just mean that Reusa’s real talent (stand up comedy) was going to waste. Telling jokes here for free.

  7. Probably rejection of Chinese 5G is impacting as well. But why did the government allow it to get to this point, and is Daniel A ramping it up again with his CCP Chinese road into Victoria announcement? Does the Labour party in Vic support affordable homes for young people, or is just about their wealthy friends? And you can ask this question of the LNP and Greens as well.

    • It is probably easier to keep doing what they have been and sell out everyone collectively than implement sensible long term reforms that affect a voter specific block now.

      • You’re right. Just ignore it until you can’t. LNP Vic answer is to re introduce religious education to schools. It’d be the last on the list for most families now

  8. The problem is that this might not be a permanent phenomenon. Depending on how Trump’s trade war plays out, IF the Chinese economy gets through it and overcomes its structural headwinds, then there is always a risk that these controls are loosened again, and as soon as that happens, prices will surge. Just have to hope that is a long way off.

    • Actually at the moment there are a lot of great deals to be done with Chinese manufactures that are looking to maintain their factory loading and bypass some currency controls in the process. Product (production capacity) is being reallocated and targeted at countries where the wholesale price in the domestic market is a little less transparent.
      There’s more than one way to skin a cat.

    • While there’s no doubt the Chinese are an incredibly industrious lot and have done wonders for the prices of consumption items in the West, there is simply no way they can escape the $40trillion in banking assets and who-knows-how-much in shadow banking assets. These numbers dwarf the debts the US banking system has — for an economy half the size. A banking crisis is nailed on.

  9. Blaming rich Chinese for the insatiable greed of well to do Australian’s…that’s priceless.
    What next:
    should they also be blamed for the nasty rash I got at one of Reusa’s Relations parties?
    Should Chinese take responsibility for our failure to develop adequate road/rail infrastructure? (after all they’re so good at it in China why didn’t they show us how to do it properly)
    Should rich Chinese be held to account for the death of Aussie manufacturing?
    Wow list goes on and on ….I had no idea they were such scumbags…ALL our problems are a direct result of their actions. Such clear headed analysis makes the next outcome in this global poker game rather obvious.
    What is it they say: First causality of any war …etc

    • Well said fisho. Ire should always be aimed at those who opened the floodgates to global capital in order to fatten the value of their portfolios and make their parasitical FIRE mates all the wealthier. Likewise, ire should be aimed at their “useful idiot” enablers who virtue-signal out of their mouths while pressing their foot firmly upon the throats of wage earners who cannot afford a home or get better pay owing to endless planeloads of competition entering daily so that we can continue the illusion of economic growth.

    • Fisho, many loans for property for the chinese came from aussie banks. I saw it at the financial group i worked for a few years ago.

      Just thinking how do they get the dosh if those ones go bad …go back home?

      • I remember a friend laughing his ass off, saying exactly that,
        what are they going to do if this all goes bad? Follow me back to China, all they’ll find out is that I borrowed the money using false credentials (a made up identity) Nah Aussie banks could see that Sydney RE was a one way play and would gladly lend against any decent property, no questions asked, regardless of the stupidity of the price paid. Both parties considered it money for old rope…heads I win, tails you loose what’s not to love about that.

    • ErmingtonPlumbingMEMBER

      “Should rich Chinese be held to account for the death of Aussie manufacturing?”

      Of cource not!
      That blame lays solely at the feet of our treasonous politicians,…on both sides of our supposed left/right political divide.

      • Really? that’s a rather naive take on modern manufacturing.)
        Treason (as in our politicians sold out our top secret plans to both under-perform and under deliver….nobody would have guess it if not for the Treasonous actions of our pollies)
        Nah I’ll skip the whole blame game because it’s just not that simple. In the end analysis I’d say the responsibility for this outcome rest fairly on the shoulders of our Joe Average Aussie that simply didn’t care about making things.

      • ErmingtonPlumbingMEMBER

        Lets take car manafacturing as an example, there isnt a car made anywhere in the world that doesn’t recieve a Government subsidy. Same goes for anywhere a train or ship is built, we could easily have retained our manafacturing capacity …our politicians chose not to.
        Toyota hybrids were already taking over the national taxi fleet (we exported 50k per year also) and they could eaisly have been kept here with Government procurement guarantees.
        Police cars, all levels of govie vehicle procurement requiring Australian made,…same goes for our entire rail rolling stock,…can be made to happen with a stroke of a pen.
        Ubers should only becable to opperate out of Australian vehicles also.
        All the “Succesfull” manafacturing countries do the same.
        How do you think Saab designed and constructed a capable 5th generation multi role fighter plane in a country of 8 million people!

      • Did our Pollies make the first move or was it the Aussie People?
        Did we reward those few that chose to the needed education or did we reward specufestors
        So many decision each one an invisible hand each one indirectly guiding the individual decisions of the few Aussies that could make a huge difference.
        Risk Reward ratios (so many dollars, so much time, so much human capital, so much can go wrong…and whats the reward? (think I’ll just buy another house…or sell one that I’ve got to a rich Chinese mate)

      • @Ermo I’m guessing you’ve never lived in any of these countries that value Manufacturing.
        I can tell you from first hand experience that there is social value that goes way beyond your actual compensation.
        In Germany the woman working at the local corner butcher shop (come Kneipe) made it her business to find out who I was, when I moved into the neighborhood, and always addressed me thereafter as Herr Doctor Engineer, in a way making sure that everyone present understood her deference. .
        In Japan it’s similar but different (kind of great that you’re working with us pity you’re not one of us)
        In Taiwan you’re a rock star, guy could give himself a heart attack just trying to exercise his options.
        In Australia…yeah my uncle also collects garbage…oh well keep up the good work (like wtf where’s the next plane out of here)

    • This is a hoot as a few of the bankers I’d meet now try and LinkedIn to me and I’m a software eng. I don’t…but they must be desperate.

    • Fisho

      I am a retired Commonwealth Public Servant who remembers that the Foreign Investment Review Board rules (which were supported by both the ALP and Lib/Nats) during the 1970s and 1980s did not allow foreign takeover of Oz real estate (including farms and industries based on real estate such as retailing). However there was considerable pressure from outside of Australia over time and somewhere in the 1990s we got increasing foreign investment in real estate (I think that was in CBD). There has always been pressure from Chinese in HK and Singapore that we allow them to buy our real estate and at some point in time under Howard (I assume, probably due to High rise Harry and Frank Lowy) these restrictions were dropped.

      So its wrong to blame locals for allowing this to happen. It happened due to external pressure from around the world and the movement towards what our universities and politicians call globalisation and freedom of movement of capital and labour.

      The vast majority of Australians are the victims of high real estate prices and that is mostly caused by foreign buyers and the BigOz movement (agains nothing to do with most Australians).

      Hopefully after a major economic contraction we will get some sense back and stop selling off our RE (and many other assets) to overseas interests.

      The debate about BigOz is being side-tracked by claims that its just a short term infrastructure bottleneck that will be solved. The costs of Biz Oz are not just to do with infrastructure but includes social welfare, policing hospitals and the fact that most of the immigrants are not really young, or skilled, and they often bring in their parents who become just another burden on Oz in time.

      • So let me understand,
        Asians have ALWAYS wanted to buy Syd/Melb Real Estate …but we didn’t let them
        Now Asians (Chinese) also want to buy Syd/Meld RE but different times so we let them
        Our Rules that they (Asians)respected in both cases yet you would lay blame for their actions on their door step.
        Um what’s wrong with us accepting responsibility for our own actions/inactions . laws, customs, legal enforcement .)
        Yea but apart from that I do get your point 😉

    • Fisho

      Your reply is intentionally out of context. And you make it sound as only the Aussie is the greedy corrupt person while the other parties are innocent upstanding persons just seeking equality and a fair go.

      First of all the rules applied to all foreign investment in real estate, not just to Asians who were not considered a main source of investment when they were introduced..

      Secondly you have to understand that in no way do I or most of Australians believe that our govt work in our interests or take note of our views (except in some symbolic way – and I am sure u know that)

      Our politicians have been bribed by external parties, including Asians. Nothing most of us can do about it, or even begin to understand the extent of this – we have ex- PMs and Ministers from both sides working for foreign firms and governments, including the Chinese govt.

      Asians never respected Australians. What they respected was our ability to field an effective military force and have powerful allies. We are now so steeped in the idea that this is another Asian country that we have no resolve to control out destiny.

      Also, in case you do not know, there have been various proposals by Asian groups and countries to effectively establish colonies, in the full knowledge that over time there is no way of restricting the movement of people out of those areas. In the 1980s the Chinese govt proposed to set up manufacturing firms in Darwin fully staffed by Chinese, and Hong Kong approached Keating to buy up large tracts of our land and bring in Chinese during the 1980s/90s. Even the Japanese govt had a proposal to set up a city near the Gold Coast, but our govt negotiated a less favourable location near Adelaide and proposed MultiFunction Polis did not make much progress.

      When interacting within Asians as a young person from 1969 onwards I found there was a constant pressure by them claim victimhood in not having the right to stay in Oz when they came here for study and to own property. The interesting thing was when I asked if their countries allowed foreigner to move there and own their real estate they would just clam up because that was not generally allowed. Both China and India restrict foreign ownership in farms and real estate and all sorts of local assets. They have used pressure in trade to take advantage with us and to bribe our politicians.

      Clearly you are biased and do not really care for or like Australians. That is up to you, but please do not pretend to me or anybody that there is some sort of victimization when Australia applies restrictions to foreigners owning our assets or moving here. This is our basic right as a nation.

      • I have absolutely no problem with Australia making rules that suit us. Make all the rules you want but YOU’VE got to police what ever rules you make. If these rules are stupid then you’ll have trouble policing them but it’s not the greedy or otherwise foreigner that’s responsible for making/enforcing Australian rules.
        As for our corrupt politicians like YEAH, it is hard to find a more self serving bunch of corrupted pr1cks then former politicians. LVO wants to know exactly what countries you might have accidentally acquired citizenship by descent in (I’ve always said forget that, instead police the actions of our Politicians and former Politicians and stop worrying about where they came from.
        As for the root of Greed and the desire of foreigners to own a slice of our corrupt wealth generation machine (aka Aussie RE) IMHO the problem is that WE have created this monster which is devouring our real economy. The laws that funnel all our “savings” (and some foreign leverage) into residential RE need urgent changes. This whole stupidity can be stopped completely with the addition of just ONE sensible Land Tax. That’s it that’s all that is really required but instead of sensible Land Tax we have decided that we need CGT discounts (like what!) and NG stupidity. We are avoiding a sensible tax regime and embracing absolute stupidity.
        So guess what smart cashed up foreigners aren’t blind they can also see where their Australian investments should be made which is right along side other Aussies in the residential RE market. Our stupidity their profit!.
        So just to be clear It is our problem. Our stupid laws are our problem, our corrupt politicians are our problem, our bleeding heart liberals are our problem…it’s our problem how we manage Australia.
        In the first instance: Managing means incentiveizing things that benefit the common good (collective wealth) and discouraging behaviors that dissipate our collective wealth, if we can’t get that first step right then there’s little hope for us.
        Think about it: what foreigner wants to own a piece of land in another country if it means he needs to dig into his pocket and pay a hefty land tax each year and on top of that gets slapped with a hefty unavoidable Capital gains tax if he happens to make a profit on the sale. The trick to making this work is making these taxes unavoidable…that means unavoidable for an Australian, unavoidable for a corporation and definitely unavoidable for a foreigner.
        Simple changes to OUR laws and the whole problem just goes away.

  10. unfortunately still lots of rich FIRB types sitll sniffing around brisbane atm for prestige property…all aided my slimey RE agents
    prestige areas like chelmer, chapel hill, ftp and the like

      • Not denying anything, just stating the facts. Unlike you, I am very familiar with the Melbourne prestige market. The denialists are those that cannot distinguish fact from wishes, and a slight drop in prices from a crash. Most denialists have missed out on extraordinary capital gains in property in recent years and so fantasise that a crash will make their ‘decision’ to not buy the right one (often a non-decision as they didn’t have the funds to do so). Whatever takes them through the night. Personally I have no denial that my property holdings have dropped in price in the last 12 months. Yes I’m still huge amounts of money ahead, unlike bitter “the crash is here” financially unsuccessful people.

      • To be clear, in your definition a $6.4 million dollar property isn’t “high grade”?

        So your argument is that really really rare high grade properties (like, perfect houses in the top two suburbs) haven’t fallen. Ok fine. This may indeed be true and you’re right, I have no experience with that market. But if that’s your definition, it is such a small and specialised slice of the market (and probably mostly cash buyers) that it means nothing for the broader market.

      • To be precise, high-grade properties in this context can belong to a variety of price points, though clearly those points are going to be in the more expensive parts of the market. However, in the current market, to be high-grade it would either have to be:
        – a house that is ready to live without major work in an excellent location – or
        – a house without a heritage overlay on a decent block in an excellent location, so that someone can knock it down and rebuild a new house on it. In this context, excellent location does not merely mean a Blue Chip suburb. Has to be on the right part of such a suburb without any major negatives (such as being on a main road, too close to train tracks, too many unit developments closeby, etc). A developable block for instance north of Toorak Rd (around the St Georges Rd area) is still very highly sought after. At least for now. Though if the current downturn continues such houses will sooner or later be affected as well.

      • Fair enough. Thanks for the reply. I’d certainly agree that relatively rare / unique (in a good way) houses should retain their value better than any other offerings in a downturn, and of course the more unique the better.

  11. These foreign buyers (explicitly) are only 10-12% of the purchasers.
    That’s only a fraction of the real foreign purchase of established Australian dwellings which is closer to 40%.
    The other 30% is via a local proxy.
    This high end trophy housing is the top layer criminal elite and overseas buyer money laundering.
    But most of the money is going into very low end modest establish led old units & small houses.

    And it’s a cash flow model – not for capital gain.

    Any Australian housing price crash?
    Opportunity to buy even more.
    They are immune and have plenty of cash income reserve to buy more in a dip.
    -/-
    The Chinese factory workers & lower class peasants & low life in China form small collectives.
    (And the North & South East Asians, Indians, Bangladeshi, Nepalese, Middle Eastern etc).

    Old broken down factory workers, toothless old woman, stall traders, tea shops traders, the underclass etc.
    $5k to $10k each.
    Each promised the chance of an Australian PR & at least the use of Medicare card trip as a tourist/visitor to work illegally, use the free Medicare services & also bring back the Australian taxpayer funded PBS medication in medical tourism.
    Aggregated into a small collective fund $300-400k.
    “Unit 31 / 58 George Street Burwood Sydney Peoples Party Prosperity Fund”

    Laundered out via the many different channels.
    Lent to a Chinese or foreign PR or citizen grant proxy in Australia who will repay at least 8% plus.
    The target property is usually an old small 2 bed walk up unit in migrant friendly zone.

    Say the Burwood old 2 bed unit $650,000.
    Or houses as that’s now easier in running the cash flow model – a run down old 3 bed fibro in Granville on a busy road for $850,000.

    The PR proxy will have a Chinese or ethnically alongee real estate agent.
    The lead tenant will be a transient again on ethnicity lines.
    Then it’s fitted out with the plywood partitions and sheet room dividers.
    In go the 8 bunks and 3 mattresses in spare areas
    The 3 rice cookers, wifi and toilet rolls.
    Advertise on Chinese or ethnic aligned websites, gumtree, street flyers.

    In come the 8 or 10 ‘foreign students’, ‘partners’ ‘sponsored’, ‘working holiday’, ‘bridging visa’, ‘protection visa’, ‘NZ SCV backdoor of non NZ born’, the ‘tourist & visitor’ long stay multiple stay’.

    2.8 million of them to pick from.
    All renting. All poor unskilled third world in debt l, here on a visa pretext, working & living illegally.

    1.4 million are in Sydney. 1 in 4 people.
    1.1 million are in Melbourne. 1 in 5 people.

    Paying an average of $160 to $180 a week.
    The proxy often living in but not on the lease.

    That $650,000 Burwood 2 bed unit?
    8 migrant guestworkers, pulling in $1,280 cash a week, which is a but only $400 declared.
    $66,500 or 10% cash return.
    Negative gearing then claimed by the proxy.

    The $850,000 Granville 3 bed fibro?
    At least 3 families or 10 renters paying $160 a week.
    Cash income of $1,600 or $84,000 also a 10% return.
    And easier, friendly council, no building manager or other bribes to pay.
    -/-
    Any problems?
    Proxy owner blames the real estate agent.
    Real estate agent blames the transient lead tenant (who is long gone).
    Claim they are visitors, family etc.
    Wait a while.
    Do it all all over again.
    This is why any attempted prosecution fails.
    -/-
    How many live like this?
    Over 2 million migrant guestworkers (of the 2.8 million total – 2.2 million TR, 440k illegally working tourist visitors, Overstayers etc). They almost all rent.

    How many dwellings?
    At least 550,000. (At a conservative 5 per dwelling)
    90% are in Sydney & Melbourne.

    How much money do they collect?
    Over $27 billion.

    How much is kept as cash not declared?
    Over $14 billion.

    How much is frauded from negative gearing?
    At least 250,000 negative gearing claimants are listed as new Australian PR with low or no income & multiple modest properties. So it’s in the billions.
    -/-
    And root cause?
    2.8 million migrant guestworkers.
    Poor, unskilled. Living & working illegally.

    There is your bubble.
    There is why we have 116,000 homeless & 350,000 seeking affordable housing.
    There is why we have crush load on public transport & roads. 400,000 extra cars.
    There is why we have 1.3 million unemployed and 1.1 million seeking work.
    There is your housing bubble and the economic and social degradation of Australia.

    2.8 million non Australia migrant guestworkers on temporary and tourist / visitor visa pretexts.
    -/-
    Want to pop the Sydney & Melbourne housing bubble?
    Dwelling use inspections.

    All migrant TR & visitors subject to identity verification and location controls / tracking – including exactly where they live, how, how much rent was paid and to who exactly.
    Then matched and checked by a new housing police unit and the ATO.
    And then backpayment, fines and seizure of established Australian housing being used illegally.

    That will restore Australian housing usage back to legal usage.

      • Ha ha, well it’s true tho.
        Just for you.
        Let me share with you 2 of my migrant friends I know well. Maybe it’s easier to show the scale of migrant trafficking & visa fraud / social impact by examples.
        -/-
        ‘Baby’ is the Chinese cleaning lady at the day care, 3 kids, here 12 years, can’t speak English, nor can the kids, Chinese school. Earns $25k a year, peasant stock uneducated & unskilled, poor as dirt on entry & did 9 years ‘studying childcare’, got the PR and then bought 3 investment properties. 2 units in central & now an old house dump in Ashfield. All worth $2 million or so.
        All that money laundered in. Xfer, then HSBC then shuffled around. Spends a lot of time in negative gearing claims and manufacturing losses and shopping, bunksets, (we joke about double v triple bunks in the second rooms and ceiling heights “can you hacksaw off the bottom legs for more top bunk headroom” etc), the best price for camping stove gas cartridges, toilet rolls & bags of rice.
        Her Husband’ paid $15k for the spousal, never lived together and now he has the PR as well so he is bringing in his real wife (as a student) plus his family.
        ‘Baby’ spends all her time on the phone organising the dwelling ‘managers’ in collecting the cash and making negative gearing claims.
        And repaying the syndicate.
        I met her syndicate when I was last in Guangzhou China by sheer coincidence.
        They are exactly as I described in the original comment. Factory worker collective $5k each into an Australian property syndicate. Each gets to visit, stay use Medicare, send their kids here, live the dream.

        James (Chonglin – number 2 unicorn?)
        He has 2 apartments in world tower and another 1 in Regis Tower. None of it bought on his money but he has the PR. 10 to 14 migrant guestworkers in most of them. In world tower it’s mostly Chinese & Taiwanese shop girls or Indonesian & Malay Chinese illegals in loan debt to a foreign criminal loan racket & going thru the ‘protection visa’ facade.
        Their mail boxes stuffed with low balance REST etc super statements or empty balance bank statements they use to get the RMS and then fake identity.
        Bunks in the laundry and mattresses inside the wardrobe. Camper stove rice cookers and plywood & bedsheet partitions. I have seen inside them and James even tried to sell me one when he wanted to shift into small houses near train stations in the suburbs as all the Chinese are doing in easier & more lucrative cash flow. (It wasn’t viable without the migrant guestworkers bunk share income and you need Chinese or ethnic enforcement & protection).

        1,900 pass keys for 232 apartments in world tower at its peak, Meriton even had a class action on it.
        The foyer btw – a railway station of Asia’s finest.
        Beats the Macau shopping centre parade any day.

        The Regis unit nearby, now that’s different.
        282 units and easily 2,000 in there.
        Most are Thai or Laos – the primary source of income for Isan province main export after the rice crop.
        They are renowned for their ability to earn the big money, 70 hour weeks at the shop & then pretend to be at the English class and send most of that money back, mainstay of XWing and the other foreign exchange xfer places that remain open with all the red light advertising (in Chinese & Thai)
        Their pimp, cousin, relative etc packaged up as their partner or Thai husband as a foreign student secondary visa holder with full work rights. Chicken factory during the day & night manager at the shop. Zero English.
        12 or 16 in a 2 bed unit in the Regis is not uncommon as they have the mattress share model – as most of the ‘tenants’ cook eat and sleep at the shop.
        So a 12 hour rotation of a bunk is $120 a week v $180 for 24 hour use. $2,500 a week cash per 2 bed unit.
        Everyone paid off, council and fire brigade, pretence of a crackdown after a fire & some bad media but back to business as usual now – all part of the exorbitant strata fee paid.
        James doesn’t really work. He says he’s an electronics technical expert (came in on skilled visa then paid to get sponsored & a PR, but he really worked at a shipping centre doing iPhone glass repairs & battery replacement. He is boasts about being the manager of the fund and the mahjong like money go around/back to the syndicate. He goes to Star City to have the alibi for the wads of cash he collects from the live in usually pyjama clad unit managers. He organises the web and street tear off ads (calls to a $25 phone / fake ID SIM card and lots of screening before you ever get inside) James was sent off to Australia like most from China as a petty criminal misfit, but he is a fervent Chinese National. Thinks they will invade Taiwan and overtake the US and western powers. Hard core Chinese Nationalist. Australia & Sydney to him is just a Chinese run place & town where there are no real rules & no penalty if you do get caught. That’s what they all think.

        Dozens more examples of reality.
        Maybe a Bangladeshi example? – the trafficking rackets in Dhaka & down in Jihad central Cox Bazar into Australia next time?
        Fed by Australian Tafe v Unis competition in ‘feeder intake’ Like to know what they really recruit and the ‘Pre-screen’, commissions, fake doc & funds packaging & the corrupted Medical ‘agent’ checks in all that?
        Then what happens when they get here and how many they can chain in.

        Until then. 🙂

  12. Hey MB.
    DON’T GET AHEAD OF YOURSELVES.

    There is so much money which wants to leave China that at best these measures might slow it a bit. In reality it just increases what the underground banks need to charge.

    • Doesn’t seem to be helping the unhappy b stards who are looking at a $2mill + haircut on their property though.

  13. Hardly a bloodbath when someone overpaid to the tune of $7M+ for a house that was advertised then as “Redevelop, Rebuild, Renovate.” It’s now being advertised as an Executor’s Sale which points to someone dying, but who knows… maybe they didn’t get development plans through. In any case, it was PASSED IN at $5.6M and is currently on the market for $6.4M, so yes, a fall in the price, but a bloodbath? Someone with a property in that league usually has plenty of other assets and can withstand a small drop in the market.

    It will be a “bloodbath” when average people owe more than their house value AND if banks call up on the loan. Or if enough people lose their jobs and can’t pay their mortgages, and are out on the street. But to call it a bloodbath now based on one example, irrelevant to 99% of the population is ridiculous.