Why is property full of conflicting evidence? Robert Simeon

Let’s look at the facts and decide where first of all we need to separate the investment property markets and the first home buyer markets from the family residence markets.

We also need to look at the current NSW Government mandate where they intend to merge councils to ensure that NSW keeps developing and driving residential construction to record levels never seen before. Premier Mike Baird is a smart man as he knows that the investor market has never been larger given the record stamp duty and land tax receipts. These are the new ‘rivers of gold’ that will in part fund this massive infrastructure spend.

According to Stockland chief executive ‘the Australian property sector is in the second quarter of what is often a seven – to – eight year housing cycle’. Now I have no problems with that and I agree given we all know what the intentions are of the NSW State government….it’s build – build – build to then generate tax – tax – tax.

We also now find ourselves in unchartered waters given we have never encountered a record low cash rate which could even go lower – another driver of the real estate market. Historically there have been two drivers to mortgage delinquency – increasing cash rates and unemployment. On that basis we can remove an increasing cash rate in the short term or quite possibly long term, although some are now warning property developers that they should be factoring in a price crunch.

Well that can’t happen given the property developers are concentrating on investors and the booming overseas market where 100 per cent of all ‘new’ developments can be sold to non – Australian residents.

Now the biggest conflict is Australia’s housing policy or better still our elected politicians who have no idea what they are talking about when they implement new policies – Federal treasurer Joe Hockey is the prime example.

Earlier this week he declared ‘that the crackdown on foreign investors illegally buying property in Australia could force down house prices.” Well for that to happen there would need to be thousands and thousands of properties flooding the market. Is he aware of something that we need to know?

This week Treasurer Joe Hockey announced new laws regulating property purchases by foreign investors and this clanger got my blood boiling. Mr Hockey said “foreign investment rules had not been significantly revised since their introduction 40 years ago.” Under the draft laws, penalties would be increased from $90,000 to $135,000 for serious breaches of residential real estate rules. Real estate agents, migration agents, lawyers and conveyancers who knowingly assist a foreign investor in breaching the rules will now be subject to both civil and criminal penalties.

Well Mr. Treasurer, all you need to do is enforce that all property buyers produce a tax file number and then you build your national Property Register and the Australian Taxation Office can record all transactions.

Now back to the “foreign investment rules had not significantly been revised since their introduction 40 years ago”. Back on 18 December 2008, the Australian Federal Government (for reasons only known to themselves) announced policy and administrative changes for foreign investors acquiring Australian real estate where they very kindly made it much easier from 2009 for foreign investors to acquire Australian real estate. This was a major announcement so I assume our esteemed treasurer completely overlooked this announcement when he went back over the past 40 years.

The existing requirement which allowed only 50 per cent of new dwellings to be sold to foreign persons in an ‘off – the – plan’ situation was changed to 100 per cent – on the proviso that developers market locally as well as overseas. Today we have overseas developers selling new developments exclusively overseas and they are not offered to Australian investors. Also a ‘new dwelling’ was defined as never previously occupied or sold. This now includes dwellings that were not sold by the developer but were rented out for no more than twelve months. I bet that has never been policed or followed up by the Foreign Investment Review Board (FIRB)?

They also implemented student visa holder residents in Australia are no longer subject to a $300,000 limit on the value of an established dwelling purchased as their principal place of residence. So students through their parents can buy waterfronts and the like? Temporary residents will not be required to notify FIRB of proposed acquisitions of an established dwelling for their own residence, any new dwellings and single blocks of residential land. Foreign – owned companies can now purchase established dwellings for the use of their Australian – based staff provided they sell or rent them if they are expected to remain vacant for more than six months.

And on and on it goes …….

So by now I am hoping that you are identifying the conflicting evidence that is coming out of Canberra. Why has the allowed foreign investor allocation for new dwellings been allowed to remain at 100 per cent where for 34 years it was set at 50 per cent?

Why today’s Chinese property investment is just the beginning. The questions that need to be asked is just why did Kevin Rudd and Wayne Swan make such significant changes to best suit foreign buyers? Why has the ratio been left at 100 per cent given the strength of the Australian property market? A strong argument that if you want to keep this at 100 per cent then remove both Sydney and Melbourne CBD’s from the overseas shopping trolley.

This week we learned that Nine Entertainment has sold its Sydney headquarters to Hong Kong based developer Euro Properties for $147.5 million. The selling agent CBRE’s Matthew Ramsay said 17 bids had been received from local and international investors and developers. Mr Ramsay said “that foreign investment in the Australian property market was at an all – time high, bolstered by a lower Australian dollar.” I’d say the lower dollar helps and the real reason is that the overseas developers can (thanks to the Australian Government) sell the entire development off – shore to investors.

Oh and I wouldn’t hold your breath if you were thinking of buying one of the 400 or so apartments when the Nine Entertainment development is offered for sale.

MOSMAN – 2088

• Number of houses on the market this time last year – 66

• Number of houses on the market last week – 47

• Number of houses on the market this week – 53

• Number of apartments on the market this time last year – 48

• Number of apartments on the market last week – 40

• Number of apartments on the market this week – 41

CREMORNE – 2090

• Number of houses on the market this time last year – 8

• Number of houses on the market last week – 2

• Number of houses on the market this week – 2

• Number of apartments on the market this time last year – 13

• Number of apartments on the market last week – 18

• Number of apartments on the market this week – 15

NEUTRAL BAY – 2089

• Number of houses on the market this time last year – 4

• Number of houses on the market last week – 2

•Number of houses on the market this week – 4

• Number of apartments on the market this time last year– 31

• Number of apartments on the market last week – 25

• Number of apartments on the market this week – 25

ROBERT SIMEON is a director of Richardson Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985. 
He has also been writing real estate blog Virtual Realty News since 2000.