Chinese investment Down Under hits $47bn

Chinese investors spend more than $47 billion on Australian real estate last year.

Chinese investors spend more than $47 billion on Australian real estate last year. Foreign investment in the country’s property market has been a hot topic of debate, with some experts raising concerns that rising house prices and supply shortages were being fuelled by the influx of overseas capital.

In recent years, regional authorities have responded by introducing various taxes on foreign investors, while Australia overall has clamped down on any illegal purchases, with stricter regulations on foreign investor applications and forcing anyone who has purchased property illegitimately to be divested of their real estate.

Nonetheless, foreign investment grew 9 per cent last year, according to the latest annual report from the Foreign Investment Review Board. This is down from the 60 per cent growth recorded last year, with foreign investment applications rising to 41,445 from 37,953.

The amount spent, though, rose significantly, with total investment approved up 29 per cent to $247.9 billion, compared to $191.9 billion in 2014-15. And, for the third year in a row, China was the biggest spender, with investors pumping $47.3 billion into the country, driven by real estate, up from $24.3 billion the previous year.

Most of the growth was driven by residential real estate transactions, with residential applications up 19 per cent to $72.4 billion from $60.8 billion. Residential property accounted for 98 per cent of all applications, and 29 per cent of total value.

Foreign demand increased prices by between $80 and $122 in Melbourne and Sydney in each quarter. This is modest when compared to the average quarterly increase of $12,800 in Australia’s two largest cities during the period.

Charles Pittar, CEO of Juwai.com, the No. 1 Chinese international property website, says: “The new report shows that the regime is working. Foreign investment is going right where Australia wants it and is one of the few bright spots of the economy.

“From the extremely low number of divestments that were forced due to noncompliance, it is safe to conclude that foreign investors are extremely well behaved. The rate of noncompliance is so tiny as to be almost invisible. While estimates show that one in 20 wealthy Australians cheat on their taxes, fewer than one in 1,000 foreign investors cheat in the property market.”

“Despite the rapid growth in Chinese investment, the US owns about four times more of Australia than China does,” he adds, “so worries that we’re selling off the country to the Chinese are unwarranted.”

 

Chinese investors still snapping up Australia real estate

15th May 2016

Chinese investors are still snapping up Australian real estate, despite the measures introduced in recent years.

Foreign investment in Australia’s property market has been a hot button topic in the country for some time, fuelled, in part, by soaring house prices in Sydney and Melbourne. Property in Sydney is now the western world’s second most expensive, in terms of house-price-to-income ratios, with Melbourne the sixth. Indeed, since 2009, house prices in the two cities have surged by 106 per cent and 89 per cent respectively.

In response, Australia introduced stricter penalties upon any illegal purchases made with out the approval of the Foreign Investment Review Board. It also introduced taxes on foreign purchases of local property – a 1 per cent fee for all Australian real estate, as of 2015. Since then, Victoria’s state government has introduced its own 3 per cent tax, now raised to 7 per cent, while Queensland and New South Wales charge 3 per cent and 4 per cent respectively.

In Melbourne, therefore, the additional taxes amount to 13.8 per cent of a property’s price, while Sydney’s charges amount to 9.1 per cent.

Nonetheless, Chinese investors continue to buy Australian property. Indeed, Australia’s taxes are lower than similar levies introduced in markets such as Hong Kong and Vancouver.

Capital growth, meanwhile, remains a big draw to Down Under, with housing demand still outstripping demand.

According to research by Credit Suisse, which has analysed data from the state governments, foreigners now buy up 25 per cent of new supply in New South Wales and 16 per cent in Victoria. Of that overseas interest, 80 per cent is from China.

Credit Suisse forecasts that to continue, fuelled by “Chinese wealth creation, attractive valuations (when compared to Tier 1 cities in China) and closer economic integration”.

“While Australian housing is at peak cycle, we believe the pace and severity of the coming downturn will be cushioned by Chinese demand,” says the company’s report.

 

Australia forces sale of 15 illegal homes

6th February 2017

Australia has ordered the foreign owners of 15 illegal homes to sell up immediately.

The controversy surrounding illegal property purchases in the country has been going on for several years, following concerns that the boom in overseas investment, particularly by Chinese buyers, was pricing locals out of housing by snapping up supply in cities such as Sydney. Indeed, Sydney has seen house prices surge a whopping 70.5 per cent since 2012, with values up 16 per cent in 2016 alone.

All overseas buyers must obtain permissiong from the Foreign Investment Review Board to invest in Australian real estate. Two years ago, the country took action by introducing stricter rules to clamp down on investment that breached that law. Now, after accusations of not enforcing the law, Australia’s government is stepping up its response one step further, by forcing the owners of 15 illegally-purchased properties to sell.

Reuters reports that Treasurer Scott Morrison has ordered property owners in China, India, Indonesia, Iran, Malaysia, the UK and Germany to sell their illegally-acquired assets. This takes the total number of forced sales since May 2016 to 61, with a total value of AUD$107 million.

 

“No policing” of foreign investment in Australia

21st July 2015
 

Sydney Harbour   Photo:   Wikimedia Commons

Foreign investment remains a controversial issue in Australia, as demand from overseas surges, sparking suspicion of illegal purchases. But new reports reveal that there is no government agency routinely policing the law.

Last year, proposed foreign investment in Australian property doubled to $34.7 billion, according to the latest statistics from the FIRB, which were published earlier this year. China led demand, with $12.4 billion of proposed investment, double that of the USA.

In response, the government announced a series of new laws designed to crack down on potential illegal purchases of property, leaving unauthorised buying of real estate by non-residents subject to fines and possible prison sentences.

New reports from Australia’s Sunday Telegraph , though, reveal that while foreign investors should seek approval from the FIRB, no government agency routinely checks whether they have done so.

At the same time, there is no regular checking of registrations with FIRB against the list of actual property purchases. While the FIRB publishes annual figures showing how many applications are approved – and their value – it does not record figures for completed sales. Indeed, there is a “substantial difference” between proposed and actual investment.

Malcolm Gunning, President of Real Estate Institute of NSW, an agency that serves Chinese buyers, tells the paper: “We have never been contacted by any government agency. We ask foreign buyers the question if they have FIRB approval but it’s not up to us to police it.”

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