Real Estate

<h2>OPINION:</h2>

Throughout April 2021, national property values increased 1.8 per cent; a whopping six times the average monthly movement in property prices for the past decade. For the typical Australian home, that signals an increase of $11,240 in value in just one month, according to <a href="https://www.corelogic.com.au/news/how-much-housing-market-can-different-incomes-buy" target="_blank">CoreLogic</a>. In markets like Sydney, that figure is likely to be much higher.

It&rsquo;s no wonder housing affordability is on the decline. <a href="https://www.corelogic.com.au/news/how-much-housing-market-can-different-incomes-buy" target="_blank">CoreLogic</a> reports that middle-income households in Sydney can&rsquo;t afford 75.5 per cent of Sydney houses and 41 per cent of Sydney units.

For many Sydneysiders, buying a home in Sydney will simply become unaffordable and unattainable. For those that do stretch themselves, they&rsquo;ll be burdened with a very large mortgage debt in danger of becoming unserviceable once interest rates eventually rise. So, what&rsquo;s the solution?

<h2>Sydneysiders to escape north</h2>

What we&rsquo;re likely to see is a migration north in search of cheaper housing, a better lifestyle and a more affordable cost of living. Places like the Central Coast will prove popular for those working in Sydney and willing to commute.

Other areas like Brisbane with a strong jobs market will also attract Sydneysiders.

[smartcode_project:default project_id=29384 project_image_fid=155506]

When you compare the house prices you can understand the appeal. Let&rsquo;s look at a few examples.

In Windsor in Brisbane, about 6km from the CBD, <a href="https://www.urban.com.au/new-apartments/amor-windsor-residences-29-bryden-street-windsor?ref=srp_listview" target="_blank">these spacious luxury one-bedroom apartments</a> start at $380,000. You&rsquo;d be hard-pressed to find an apartment for this price in Sydney, let alone one so desirable.

On Brisbane&rsquo;s Queen St, perched on the river, is <a href="https://www.urban.com.au/new-apartments/443-queen-street-brisbane?ref=srp_listview" target="_blank">this luxury development</a> boasting brand new one, two and four-bedroom apartments starting at $730,000 in the heart of the city.

[smartcode_project:default project_id=29185 project_image_fid=83369]

Ascot in Brisbane is one of Brisbane&rsquo;s most expensive and affluent riverside suburbs, about 7-8km from the CBD. For <a href="https://www.urban.com.au/new-apartments/tulloch-house-240-lancaster-road-ascot?ref=srp_listview" target="_blank">these brand new three-bedroom apartments</a>, it will set you back around $1,230,000. That&rsquo;s close to Sydney&rsquo;s median property price, but buyers get a brand new luxury apartment in one of the most sought after locations in Brisbane.

<h2>Is leaving Sydney the best option for me?</h2>

If you feel like you&rsquo;re stuck in the rat race and can&rsquo;t get ahead, relocating out of Sydney might be a good option for you. It&rsquo;s best to do extensive research on which areas have strong job opportunities in your field and will support the lifestyle you want. Don&rsquo;t be enticed by more affordable housing alone.

If you feel like you&rsquo;re being priced out of the Sydney market, leaving Sydney isn&rsquo;t the only option. Renting a home in Sydney while investing interstate (known as rentvesting) is one option you may want to consider to build wealth without needing to leave.

In fact, with the exodus north, an investment in an area like South East Queensland is likely to be a savvy choice as demand pushes up prices and capital growth prospects for investors.

If the investment performs well over time, the equity could potentially be used as a deposit to fund a future house deposit in Sydney.

Olivia Round

OPINION: Sydneysiders set to migrate north

<html><body>
GUEST OBSERVER
As a nation, Australians are fascinated with residential real estate.
Today, you cannot open a newspaper, turn on the radio, watch television, or even have a chat with a friend without the subject of residential real estate coming up. 
Of course, when you consider that real estate is the nation’s number one asset class, this is hardly surprising. 
Everyone has an opinion when it comes to real estate. Most recently, we have heard a number of people argue that lenders and mortgage brokers are encouraging borrowers to take out loans they cannot afford, putting them in housing stress. 
I don’t want to contribute further opinion to this topic. Instead, I want to lay down some facts and figures that will hopefully go a long way to painting the true story. 
Residential real estate, like any commodity, is driven by a few key fundamentals, including supply and demand, the cost of credit, employment and access to credit. 
Access to credit, or the amount of money an individual can borrow, will determine what they can and will pay for a property. In recent times, there has been a lot of discussion about the high debt levels in Australia and the purported inappropriate lending practices undertaken by Australia’s lenders and mortgage brokers. 
While we do have high levels of debt in Australia, data from CoreLogic shows the proportion of income needed to service current household debt is actually lower now than it was in 2011. 
In 2011, the proportion of household income required to service an 80% LVR mortgage across the combined capital cities was 43.92%. By 2016, that percentage had dropped to 35.02% thanks, in part, to historically low interest rates.  
So while property is certainly expensive and the level of household debt is high, it would seem many Australians are actually in a better position now than they were five years ago.  
Moreover, lending practices are constantly improving. Borrowers aren’t being forced into higher loans, they are simply choosing to borrow more in order to purchase their desired asset. 
The banking industry is highly regulated and both brokers and lenders are more scrupulous than ever.
20 years ago, a home loan application was a single sheet of paper and the level of data that was collected by a lender was scant. 
Only 10 years ago, approximately 50% of all home loan applications in Australia required borrowers to certify their income and their asset position. These loans, commonly referred to as low-doc or no-doc loans, were very popular within Australia. 
When you contrast these lending practices with what we have today, it is fair to say things have come a long way. 
Today, new legislation requires brokers and lenders to forensically examine a borrower’s assets and liability situation. They are also required to verify a borrower’s employment through documentation as well as telephone checks and discussions with employers. At the end of the day, nobody - lender or mortgage broker - wants a consumer to be in a situation where they access credit they can't afford. 
At Mortgage Choice, the vast majority of our customers are more than nine months in front of their mortgage repayments. They are overpaying their mortgage in a bid to quickly and efficiently reduce their level of debt. 
 Looking ahead, brokers and lenders will continue to do the right thing by their customers, helping them into loans they can afford and helping them to get their foot onto the property ladder.   
I believe property prices will continue to rise across most markets. However, the rate of growth may be more moderate than what we have seen in the past. I do not think mortgage holders are at risk of losing their property. I believe Australia’s lenders and mortgage brokers do all they can to ensure borrowers are in the right product for their needs and long will this tradition continue.
John Flavell is chief executive officer <a href="https://www.mortgagechoice.com.au/" target="_blank">Mortgage Choice</a>.
</body></html>

jchancellor-FAypfDUnLy

The industry has never been healthier: John Flavell

<html><body><div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
Onthehouse Holdings Limited, the ASX listed online real estate content and services platform, has announced it is looking for a joint venture partner to assumed majority ownership of its consumer online division, the platform providing free access to property sale prices and estimated home values on most properties in Australia.
A strategic review of the company following months of internal company turmoil has resolved to keep and concentrate on its real estate solutions division that provides software tools for real estate agents, other property professionals and financial institutions through Console and Real Estate Ad Network. 
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
It conclusions reached by the board have been touted as avoiding the need to raise capital and dilute the current shareholding, or obtain debt funding.
The board told shareholders:
<ol>
<li>
Consumer Online (COD) and Real Estate Solutions (RES) are distinct businesses and there is no compelling inter-dependency between them;
</li>
<li>
As a consequence they need to be managed independently with a focus on an individual strategy for each business;
</li>
<li>
Sharing of data will be by way of license agreements;
</li>
<li>
The new COD subsidiary will have its own Board chaired by Onthehouse’s largest shareholder Michael Dempsey and will include current Board member Lisa Hickson;
</li>
<li>
RES generates approximately $9 million in free cash per year and is able to self-fund implementation of its strategy;
</li>
<li>
COD consumes approximately $7 million in cash per year that is currently being funded by the cash generated by RES;
</li>
</ol>
It said both businesses had "significant intrinsic value that is not currently recognised by the market."
Its COD will be developed in a non-listed JV vehicle in which OTH Holdings would maintain an interest, of between 30% and 49%.
The board anticipates JV partners could be one or several of the following:
<ol>
<li>
Like businesses that can add experience, technology or other industry assets etc. to the venture; and/or,
</li>
<li>
Venture capital investors or other funders.
</li>
</ol>
"The board believes significant value can be created in this structure without the responsibility of funding the COD business.
"The search for appropriate JV partners has commenced and OTH is currently in discussion with a number of parties," chairman Tony Scotton told shareholders.
The Board expects that the separation strategy will take six months to execute. 
The new company structure, allowing the RES business to develop its potential without the constraints of funding COD, would see the listed company having a stable, profitable core business with a significant investment in the "potential upside of the COD business."
Over recent times activist investors have appeared on its share register and then its board following the abrupt mid-2014 departure of its founding shareholder and chief executive Michael Fredericks. Chris Meehan has been named chief executive officer having been acting chief executive since February. Other recent appointments include Emily Santucci as chief financial officer and Andy Antonini as chief operating officer.
Michael Dempsey who pocketed about $150 million from the sale of Ezidebit, took an 8 per cent stake in Onthehouse in December last year.
In 2013 it billed itself as Australia’s third largest real estate portal when it reached one million unique browsers per month. It is now more than three million.  
Onthehouse.com.au provides free access to 13.6 million Australian property data sets to its online and mobile visitors, including live sales and rental listings.
But the Consumer Online consumes about $7 million in cash annually triggering recent pre-tax impairment charges of $10.5 million, which led to a $9.1 million half-yearly loss for the company.
The $9.1 million loss for the six months to 31 December 2014 came after reporting a $587,000 profit the year before.
Disregarding the one-off costs, Onthehouse posted a $93,000 underlying profit – an 86 per cent drop on the previous year.
Onthehouse's total revenue sits at around $13 million - the group’s Real Estate Solutions division at $10.7 million.
The group’s Consumer Online and Data Analytics saw revenue at $2.3 million.
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div></body></html>

Onthehouse.com.au seeks to sell unprofitable consumer website after strategic review

<html><body>
GUEST OBSERVER
<div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
The repeal of the Valuers Act 2003 which will see the deregulation of the valuing industry in NSW is cause for concern.
Minister for Innovation and Better Regulation Victor Dominello last week introduced a bill to repeal 30 laws including the Valuers Act 2003 which will see the deregulation of the valuing industry in NSW and will remove government controlled licences. 
If the government does not participate in the controls and oversight of the profession then the potential for detriment exists. 
We find it alarming that the government is on a constant campaign of delicensing. 
REINSW sees a role for the professional bodies working co-corporately with government for the oversight of compliance with the regulatory environment and the maintenance of professional standards.
While industry must be involved in the process of regulation, it alone should not be solely responsible. 
 
Malcolm Gunning is president of the Real Estate Institute of New South Wales and can be contacted <a href="https://www.reinsw.com.au/imis15_prod/">here</a>.
</div>
</div>
</div>
</body></html>

Deregulation of valuing industry a concern: REINSW

<html><body>
One of the life’s most stressful events is buying or selling your first home – it’s said to be up there with getting married. 
The REIQ offers several tips to first home buyers and sellers that will help you navigate one of life’s trickiest transactions with confidence and with a degree of certainty that you’ll achieve a great outcome, whatever you want that to be.   One of the keys to success is engaging a real estate professional that you can trust to be your guide throughout the process. You need to find that person who you can connect with; that person who is experienced and can help you with the many decisions that you are about to make.    Choosing your agent:
Interview the experts and get their views. Meet with two or three agents and talk to them about what you want to achieve from the transaction. If you’re buying your first home a buyer’s agent is a very good idea and if you’re selling for the first time then speak to a few agents from different offices to get a feel for how they each will approach the sale of your home.   Ask questions:   1. What is your area of expertise? Many people don’t realise that real estate agents can engage in a broad range of activities, including selling residential property, auctioneering, commercial property sales, leasing and management, along with business broking. So you need to choose someone whose background is in the area that you’re seeking guidance in.   2. Feedback: You need an agent who has experience in giving feedback and having tough conversations with clients. Sometimes it can be difficult to give honest feedback to vendors who don’t want to hear that the price they want is unrealistic or the renovations are not a good idea. You want an agent who will be honest and up-front with you, so ask them about their style of feedback for vendors and what they do when they have to have the tough conversations.   3. Do you have professional indemnity insurance? This is not a statutory requirement so not all agents will have it, which is a problem if something goes wrong. All REIQ accredited agency members are required to carry a minimum of $1 million in PI insurance. It gives an added peace of mind. After all, you don’t want to be embarking on one of the biggest transactions of your career without a safety net, do you?   4. What is your dispute resolution process? Nobody wants to think that something will go awry in their property transaction but if it does, what options are available to you? If your agent doesn’t have a simple, accessible dispute resolution policy in place how will you know what to do in the event of a dispute?   5. How do you stay up-to-date with legislative changes? Not all agents maintain their professional knowledge and this can be concerning when you consider that property transactions are very heavily regulated by government legislation. You really need to make sure that the agent you choose keeps their knowledge up to date. All REIQ members are required to maintain their continuing professional development as a requirement of their membership and this gives you peace of mind to know that they are up to date.
ANTONIA MERCORELLA is CEO of the <a href="https://www.reiq.com/" target="_blank">REIQ</a>.
</body></html>

Property 101: How to take the stress out of property purchasing and selling: Antonia Mercorella

<html><body>
<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
The Australian drone industry is set for a shake up following the announcement of a long-awaited relaxation of regulations on their operation.
Australia’s Civil Aviation Safety Authority (CASA) says the amended regulations will come into effect in late September 2016, and with them comes the introduction of new categories of what are known as remotely piloted aircraft systems (RPAS).
The regulations define new low-risk commercial RPAS operations, which will allow operators of sub-2kg craft to fly without the need for an approval or licence.
A drone must be operated in daytime and within visual line of sight of the remote pilot to be classified as low risk. It must not be flown over populous areas and must be kept at least 30 metres from other people.
The drone cannot be flown greater than 130m above ground and it must not be flown within 5.5km of a controlled airport.
Commercial operators in this new category will have to register their operations with CASA on a yet-to-be live website.
Relaxed regulations will also apply to private owners of RPAS of up to 150kg. This is provided they only fly their drone over their private property and they do not operate their aircraft for direct commercial reward.
<h2>Why the change?</h2>
In 2002, CASA was the first in the world to regulate the operation of drones.
The regulations, contained in Part 101 of the Civil Aviation Safety Regulation (CASR 1998), were long considered ground breaking. Much of the success of the Australian unmanned aircraft industry is owed to the flexible approach outlined in the regulations.
In 2007, there were fewer than 25 certified drone operators in Australia. By March 30, 2016, this number had grown to 500, with most operating small multi-rotor RPAS.
But with this rapid growth came the increasing need for regulatory reform. CASA recognised that the regulations needed to keep pace with increasingly capable technology, and the changing operational needs of the sector.
It also realised that processing an ever increasing number of regulatory applications was not sustainable.
<h2>Welcome news</h2>
The new changes will significantly reshape the drone industry.
Operators already licensed by CASA are expected to face increased competition from the new sub-2kg RPAS operators. These new operators will be able to provide equivalent aerial photography and inspection services without the same regulatory overhead.
Similarly, there will be an increase in the number of end-users choosing to own and operate their own internal RPAS capability instead of contracting existing RPAS service providers. Examples include the use of small inspection drones on building sites and the use of drones by tactical police units to assist them in hostage situations.
But it is not all doom and gloom for the current licensed RPAS operators. The standard operating conditions applicable to the new low-risk categories are restrictive.
Larger and more reliable drones will still be needed to carry bulky and more expensive payloads such as laser scanners, and hyper-spectral and cinema-quality cameras. These drones will still need to be operated by licensed operators.
Approval is still required for first person view (FPV) outdoor flying operations, where the remote pilot flies by means of a camera mounted on board the drone.
Similarly, autonomous drones, which operate without any input from a pilot, also require CASA approval on a case-by-case basis.
Research and educational institutions, such as universities, are also expected to benefit from the new categories, provided they operate their aircraft over their own property and in accordance with all other operational restrictions.
Previously, these institutions were subject to the same licensing requirements as commercial operators.
<h2>Hobby users</h2>
The amended regulations do not address concerns posed by the rapidly growing number of hobby drone users.
Regulations applicable to hobby or recreational users are contained in CASR 1998 Part 101.G, which is the subject of a separate CASA regulatory reform project.
There is growing concern over the risks hobby users pose to other aircraft and to members of the public. Some of these hobby users are not aware of the potential danger their drone may pose.
There have been numerous near misses of small drones with passenger aircraft in recent years. As the rate of these incidents increases, there is real concern that a drone will eventually be ingested into an aircraft engine causing catastrophic damage – or worse, an airline crash.
Others are well aware of the dangers their drones may pose to the public but they are deliberately mischievous anyway.
Education remains the only effective tool, with CASA leading a campaign to educate hobby users on the safe operation of their aircraft and the regulations that apply to them.
Without doubt, the release of the amended regulations will mark a significant milestone in the history of the Australian drone industry. They will help to sustain the safe and viable growth of the sector.
But the devil may still lie in the detail, of course, with the accompanying manual of standards yet to be released by CASA. The manual will contain more detailed requirements including those for remote pilot licences, flights in controlled airspace, and flights beyond visual line of sight of the pilot.
CASA’s exact interpretation of “Aerial Work” and “Commercial Reward” also remain unclear.
Reece Clothier is senior lecturer, RMIT University and can be contacted <a href="https://theconversation.com/profiles/reece-clothier-248964" target="_blank">here</a>. Jonathan Roberts is professor in robotics, Queensland University of Technology and can be contacted <a href="https://theconversation.com/profiles/jonathan-roberts-94843" target="_blank">here</a>. Both are authors for The Conversation.
</body></html>

New relaxed drone regulations will help the industry take off

<html><body>
GUEST OBSERVER
Consumers lose out when a real estate agent acts fraudulently. This includes actions such as false and misleading advertising, deceptive conduct and misappropriation of trust funds.
So what is behind the increase in white-collar crime and fraudulent behaviour? And are there are any preventative measures that could be implemented to reduce the impact on consumers?
<h2>The scale of the problem</h2>
There are various property agency laws and codes of ethics that set out appropriate standards of behaviour for property agents.
In New South Wales, occupational licensing for property agents and certificates of registration are mandatory if working in the property industry. Occupational licensing for this category is managed under the auspices of individual state and territory Fair Trading offices.
My research concluded that education plays a pivotal role, coupled with industry experience, in combating white-collar crime in the property industry.
From 2003, the NSW regulator diminished the existing higher educational requirements and abolished the need for industry experience. This has been followed by significant increases in consumer and trader complaints in real-estate transactions.
These complaints include non-disclosure of a vested interest, misrepresentation, unethical conduct and fraud.
<a href="/images/2016/04/01/Screen%20Shot%202016-04-01%20at%209.00.35%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/01/Screen%20Shot%202016-04-01%20at%209.00.35%20AM.png" alt="">
The table above indicates an increase in complaints from 1756 to 3754 in a decade.
In 2012-13 Fair Trading reported only 1,444 complaints, which represented a decrease of 17.77 percent. However, there does appear to be an anomaly with the following year, which reported an increase of 113.78 percent. Therefore, it is possible that the complaints for 2012-13 could have been partly accounted for in the following financial year – hence the disparity.
If this is the situation, then an average calculation would indicate that complaints increased in 2012-13 and 2013-14 by an average of 48% for each year. This appears more in line with trends during the earlier years.
My 2013 study identified ten randomly selected court cases from 2010 to 2013 that related to trust accounting fraud. Of these, five cases disclosed the amounts misappropriated – which totalled A$2,107,261.
I undertook further research on five court cases that occurred during the 2013-14 financial year. The misappropriation of trust funds ranged from $813,936.00 to $1,434,111.43. The penalties ranged from jail sentences, extending from a bond for good behaviour to 18 months’ imprisonment, to disqualification from holding a licence or certificate and working in the property industry.
<h2>The way forward</h2>
Consumer complaints and trust accounting fraud continue to increase. Over the last decade, the property industry has continuously lobbied the regulator for an improvement in the educational requirements for the certificate of registration and licence categories.
My research developed a model of occupational corruption. Based on this, it recommends the following preventative measures be implemented:
A major overview of the educational course curriculum and associated mandated qualifications. All certificate of registration holders should complete a Certificate IV qualification. All licensed holders should complete a diploma qualification, both within the property services training package and the relevant category of employment.
An increase in the mandated units and training hours required before starting work in the property industry. The previous industry experience of a minimum of two years should be reintroduced.
A points system where agents must submit their business and personal financial details to Fair Trading in order to obtain or renew their property licence. This will identify the agents whose businesses are not trading profitably and who might be considered high risk in trust accounting ethics and processes. The issuing of the licence should be linked back to obtaining a nominated minimum point score that reflects the financial viability of the licence holder or business.
An interview system, where agents applying for their licence are required to undertake an oral examination. In Australia, the Australian Property Institute and the Royal Institution of Chartered Surveyors have for decades successfully applied this method of assessment to the valuation profession.
 
<a href="https://theconversation.com/profiles/hera-antoniades-229521" rel="author">Hera Antoniades</a> is senior lecturer, School of Built Environment, University of Technology Sydney and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/hera-antoniades-229521" target="_blank">here</a>.
</body></html>

How can we arrest the rise in white-collar crime in Australia’s property industry?

<html><body>
GUEST OBSERVER
ABC’s Four Corners program highlighted concerns that Chinese criminal funds may be propping up Australia’s real estate market. Why is Australia’s anti-money laundering framework not providing sufficient comfort that these concerns are addressed?
The answer lies in both the scope of Australia’s anti-money laundering and counter-terrorism financing laws, as well as the enforcement of these laws, especially in relation to proceeds of foreign offences.
The scope of the law
In the 1980s Australia became one of the first countries to adopt anti-money laundering laws. In 1989 it joined a small group of countries in the Financial Action Task Force (FATF), taking the lead in identifying appropriate policing measures. FATF then developed into the international standard-setter for anti-money laundering measures, as well as counter-terrorism financing measures, a mandate added in 2001. It also assesses its members’ compliance with those standards, known as “recommendations”.
Businesses covered by these rules need to identify and verify the identities of their customers, assess and mitigate the money laundering and terrorist financing risks they pose and report suspicious transactions as well as certain large transactions. By doing that they protect themselves from committing money laundering offences and their industries from abuse by launderers.
Australia held FATF’s presidency in 1992-1993 and again in 2014-2015. However, its early start in adopting anti-money laundering laws and its leadership role in the FATF did not ensure a soft assessment regime for Australia. In 2005, FATF criticised Australia’s anti-money laundering and terrorism financing regime for lagging behind, especially in terms of the scope and enforcement of its laws. It was held to be fully compliant with only 12 recommendations and largely compliant with another 14 of the 49 recommendations that applied at that stage.
This spurred Australia to adopt the current Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 (AML/CTF Act). This Act created a world-class framework in relation to financial institutions. But the overall framework was not complete. FATF’s standards apply to financial institutions as well as a number of so-called “designated non-financial businesses and professions”. This list includes casinos, lawyers, real estate agents, dealers in precious metals and stones, and trust and company service providers.
In 2006, with the exception of casinos and bullion dealers, these were set aside to be addressed in a second tranche of AML/CTF Act reforms. Despite various statements and government consultation, also in the context of the current statutory review of the AML/CTF Act, these reforms have not yet been effected.
Combined with the limited transparency of the beneficial ownership of companies and trusts, it leaves the property market vulnerable to money laundering and terrorist financing abuse.
The lack of enforcement of the existing criminal laws is, however, also a cause for concern.
Lack of enforcement
Australia has a well-developed set of statutory money laundering and terrorist financing offences, both at the federal and a state/territory level. At the federal level, for example, the Criminal Code creates offences that can be committed knowingly, recklessly and even negligently, for example when dealing with property which is reasonably suspected to be proceeds of crime.
The 2015 FATF assessment report of Australia found that money laundering offences involving proceeds of foreign offences, including corruption offences, are not frequently prosecuted “because Australia does not consider that foreign predicate offences are major predicates for money laundering in Australia.” (par 3.44). Predicate offences are offences generating the proceeds of crime to be laundered.
Authorities mentioned the difficulties of obtaining off-shore evidence to prove the foreign offence. But a lack of effective federal/state law enforcement coordination was found to pose a particular barrier, especially in relation to the property market:
For example, while ML (money laundering) of foreign illicit proceeds through real estate is perceived to be a risk for Queensland (Gold Coast), Queensland has no ML convictions for this activity. AFP (Australian Federal Police) indicated that it does not focus on this risk, believing this ML activity relates to State level predicates, whereas the Queensland Crime and Corruption Commission stated it does not focus on this risk as it relates to foreign money and is thus a matter for AFP.
At the same time, assessors took note of two examples of successful prosecution for foreign predicates (fraud and corruption) by AFP and the registration of two restraint orders from Papua New Guinea in Queensland.(par 3.44)
The overall enforcement strategy therefore does not reflect a high level of concern about the abuse of the property market by those wishing to launder proceeds of foreign corruption.
Protecting the property market
Much can be done to increase the protection of the property market against criminal abuse. While the AML/CTF legal framework should be extended to all businesses and professions covered by the FATF standards, compliance and red tape concerns may continue to delay the second tranche of reforms. The best starting point would therefore be to work with the available legal tools and to prosecute money laundering offences involving designated non-financial businesses and professions and markets of concern, such as the property market. In relation to foreign corruption that will require close cooperation with foreign counterparts.
Increased prosecution will also provide improved evidence of the abuse that actually occurs and inform the debate on the urgency and nature of the law reforms that are required. However, Australia must also enhance the transparency of beneficial ownership of companies and trusts. If criminals find it more risky to purchase property in their own names, they will increasingly hide behind business structures. It is therefore important to improve public information regarding the control of companies and trusts.
It is also important to reflect on money laundering law enforcement priorities. Money laundering prosecutions levels increased over the past few years but corruption, especially foreign corruption, struggles to receive appropriate attention.
If Australia wants to hold an international integrity leadership position and improve its ranking on the Transparency International Corruption Perception Index, it will need to join its international counterparts by taking firm action against foreign corruption, including the laundering of the proceeds of foreign corruption.
<a href="https://theconversation.com/profiles/louis-de-koker-100846" rel="author"></a>Louis de Koker is professor of law, Deakin University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/louis-de-koker-100846" target="_blank">here</a>.
 
</body></html>

Much more can be done to keep foreign criminal funds out of Australian property

<html><body>
<img src="https://counter.theconversation.edu.au/content/63187/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
China has a debt problem. But research shows that it’s not the industrial sector or state-owned enterprises (SOEs) to blame but the booming private property market.
The global financial crisis illustrated how debt problems in one part of the world (in this case the US and Western Europe) could have widespread negative consequences. As China is now the world’s top goods trader, second largest economy and third biggest credit nation, a debt meltdown there would have harmful effects well beyond its borders. 
The latest data from the Bank of International Settlements shows that since 2008 China has been responsible for nearly one in two dollars of new borrowing globally. China’s debt has reached 254.9% of GDP, up from 147% at the end of 2008. That’s even higher than in the US, where per-capita incomes are nearly four times greater. 
Two-thirds of China’s debt is accounted for by corporates, while the remainder is in the hands of governments and households. Many commentators blame inefficient and loss-making SOEs for the problem, particularly those in the construction sector and areas of industrial overcapacity such as steel. 
Recent research using survey data from China’s National Bureau of Statistics confirms businesses in steel, coal and electricity have indeed got increased debt levels, relative to their own equity and assets. But when expressed as a proportion of GDP this increase has been small and mostly offset by firms in other parts of the industrial sector with falling debt levels. 
Relative to GDP, between 2008-2015 the debt of industrial firms rose by just 4.4 percentage points, while those in construction increased by 7.0 percentage points. Towering above both was businesses in the real estate sector, where debt leapt by 29 percentage points. 
So while it might be true to say that construction and an over-producing industrial sector are contributing to China’s debt problem, they aren’t the main drivers.
How real estate and private firms are driving debt in China
A recent chapter by economists at the Reserve Bank of Australia (RBA) looked at data from Chinese listed companies and came to similar conclusions. 
Industrial firms (manufacturing, utilities and mining) subtracted from rising overall debt levels from 2008-2015. 
Between 2008-12 it was construction firms that were mostly responsible. Since then it has been businesses in real estate. 
In terms of how debt is held between state and private firms, survey data shows within the debt-laden real estate sector, private developers have been increasing their debt levels, while those of state developers have been falling. 
Across all sectors, state-owned or controlled businesses accounted for three-quarters of the increase in overall debt levels between 2008-2012, evidence from listed companies reveals. But since then these businesses have actually subtracted from rising debt levels, leaving private firms entirely responsible. 
What China’s government can do about it
China’s overall debt trajectory is unsustainable. Research from the International Monetary Fund (IMF) finds that very few countries have experienced a similar rapid build up of debt and escaped without an eventual bust. 
The question for the country is how to reduce the reliance of corporations on borrowing while still maintaining a robust rate of economic growth. 
If state banks throwing good money after bad at SOEs in construction, coal, steel and so on is the problem, then the policy prescription is clear. 
In August, deputy managing director at the IMF, David Lipton argued: 
“To tackle the problem, the Chinese government must, in the words of Premier Li Keqiang, "ruthlessly bring down the knife [on] zombie enterprises”,…It is especially important to restructure SOEs. Many are essentially on life support.“
SOE reform is undoubtedly valuable but alone is unlikely to solve the problem. This is because the big driver, particularly in recent years, appears to be increasingly speculative behaviour by those in the real estate market. 
On the supply side, this has often involved private developers, albeit sometimes with minority state shareholders, while the demand side is comprised of households. The fact that the private sector looms large in China’s debt in some ways makes the problem more complicated to deal with. 
Direct administrative measures such as forcing a merger between a weak state firm and a stronger one may not be possible with private sector players because the government does not own or control these companies. 
At the same time, the unemployment created by the collapse of a large private company would not be attractive for a government obsessed with social stability either. 
Adding further complexity for China’s regulators is that sometimes households do not buy real estate assets directly but instead do so via financially engineered wealth management products, sold by financial institutions. 
The growing importance of mortgage lending in China also creates a potentially destructive link between any problems in the housing market and the stability of the financial system more generally. 
When house prices began to fall in the US in 2006, banks were left with massive bad debts as households defaulted on their mortgages. That said, downpayment requirements in China tend to be high relative to other countries, providing banks with some degree of protection. 
In weighing up China’s debt outlook, another positive consideration is that the household debt to GDP ratio in China is only 40.7%, compared with 78.4% in the US and a whopping 125.2% in Australia. 
Still, given the central role that real estate and the private sector play in China’s debt challenge, moves by the Chinese government to curb property market speculation should be welcomed. Similarly, tighter rules on wealth management products also make good sense, such as limiting the involvement of smaller banks that have less capital to offset potential losses.
James Laurenceson is deputy director and professor, Australia-China Relations Institute (ACRI), University of Technology Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/james-laurenceson-203" target="_blank">here</a>.
</body></html>

Private property developers are really driving China’s debt: new research

<html><body><div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
Real Estate Institute of Australia (REIA) CEO, Amanda Lynch, has welcomed the 2015-16 Budget as a win for her small business estate agency members.
But also one that importantly retains key tax arrangements that benefit housing investment.
Ms Lynch said the generous asset depreciation measures would particularly benefit the real estate sector
“The government is to be commended for ensuring stability within the sector in continuing the current tax arrangements as they relate to both Capital Gains Tax and negative gearing.” 
“With other sectors of the economy slowing, housing will play an increasingly important role and it is pleasing to see the government has not tampered with tax arrangements that have been proven to help stimulate housing investment in Australia.” 
“Abolition of negative gearing would result in a dwindling supply of properties for rent, escalating rents and reduced opportunities for low to middle income earning Australians to create wealth for self-funded retirement.” 
She welcome the small business package giving business owners meaningful incentives to hire, invest in equipment "and importantly grow their livelihood.”
</div>
</div>
</div></body></html>

Real Estate

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Real Estate

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News