Foreign buyers inquiry leaves many questions unanswered
The eagerly awaited report on foreign investment in residential real estate was finally released last week and yes, the House of Representative committee has done a reasonable job with its findings.
Although with closer scrutiny, many questions remain both unclear and without a definitive answer.
The Chair’s forward starts with a predictable warm and fuzzy moment: “Buying into the Australian Dream doesn’t come cheap.”
Only to proceed to the most amazing faux pas: “There is no simple explanation for the decline in housing affordability – although lack of land supply (a government responsibility), underdevelopment (a government responsibility), state planning laws and regulations (a government responsibility), local council red tape (a government responsibility) and stamp duty and tax arrangements (a government responsibility) likely all play a part.”
What a fascinating admission that surely warrants another inquiry into these frank admissions.
“According to Foreign Investment Review Board (FIRB) statistics, in the first nine months of this financial year, FIRB approved foreign investment into residential property of around $24.8 billion, 44% higher than the $17.2 billion approved during all of 2012/13. Much of this investment is concentrated in the Melbourne and Sydney markets. Most of the increase is attributable to proposed investment in new property, which at $19.3 billion for the first 9 months of 2013/14 is 79% higher than 2012/13. The total number of established property approvals for the first 9 months of 2013/14 is 5,755 compared to 5,101 for 2012/13.”
Then the clanger: “First, there is no accurate or timely data that tracks foreign investment in residential real estate. No-one really knows how much foreign investment there is in residential real estate, nor where the investment comes from.”
That being the case then how can the House Economics Committee find that foreign investment is not causing distortions in the Australian housing sector – when by their own admission they concede they have no idea how much real estate has been sold to foreign buyers?
Then of course: “During the course of the inquiry, it came to light that no court action has been taken by FIRB since 2006. During the entire Rudd-Gillard-Rudd government, not one divestment order was issued, which means that not one government sale of illegally acquired property was made. This compares with 17 divestment orders between 2003 to 2007 when foreign investment in residential real estate was at much lower levels.”
They quite conveniently failed to mention that for some strange reason the Rudd government abolished FIRB approvals to foreign investment during the course of the global financial crisis. At the time it was most unclear as to what was exactly happening as decisions based on FIRB appeared at best chaotic. How can you then prosecute when the Rudd government made this totally legal?
Of course the bull in the china shop (no pun intended) is those many loopholes that exist to overseas buyers in that it is very easy for a family member who resides overseas to simply transfer monies into an Australian bank account. The family member here goes out and buys a property in their name and when the overseas family member gains Australian residency they simply pay the stamp duty to transfer the property into their own name.
Alternatively, attaining Australian residency can take a few years so it is much easier to take up New Zealand residency – an almost immediate process. New Zealanders are permitted to buy all forms of Australian real estate so it is very easy to beat the system. It is just a shame that the Senate Inquiry missed many of the existing trap doors that remain open in the Australian property industry today.
Of course it is just a mere coincidence that the Chinese government requested a bipartisan arrangement with the Australian government to process the identities of all Chinese buyers who purchase Australian real estate. Cue the establishment of a national register of land title which still requires approval from the states and territories – who are yet to be consulted on this measure.
Then of course the recently announced Free Trade Agreement with China allows any Chinese national full access to acquire any commercial or agricultural property up to $1 billion.
I’m really struggling to get my head around this.
