GREG RAY: Property heading north
YOU’VE got to be careful, writing about foreign investors buying up Australian residential real estate.
Careful because it’s easy to get yourself accused of being xenophobic and racist.
But as time passes and more hot money from overseas pours into the supposed ‘‘safe haven’’ represented by Australian houses and apartments, more commentators are starting to take the risk.
Most of the money is coming from China, which isn’t at all surprising, given the tremendous growth in that nation’s wealth in recent years. The nominally communist country boasts a great many millionaires, and plenty of them are keen to squirrel some of their funds somewhere safe and stable.
Despite the fact that talking about this issue sets some people off on a rant, the question remains: what effect is this flood of cash having on our real estate markets, the price of shelter and the cost of living?
Some say that doesn’t matter. That the foreign investment is a good thing since the cash spent on properties winds up circulating in the wider economy.
Others aren’t so sure. They worry that Australian buyers – and first home-buyers in particular – are being priced out of large sections of the market.
Australian law is supposed to contain safeguards against this. Overseas buyers are legally permitted to buy new residential properties. But when it comes to pre-existing homes, only those with permanent resident status are allowed to buy.
That’s the theory, anyway. In practice it seems the barriers are practically non-existent, and not just because it’s so easy for permanent-resident relatives of overseas buyers to act as fronts.
Last year an Australian reader of an online finance blog tried the experiment of applying for permission from the Foreign Investment Review Board to buy an Australian home.
The reader didn’t use his or her own name. Instead, they used the bogus name ‘‘Chodley Wontok’’, providing a heap of equally bogus pieces of identifying information.
Using fake passport and visa numbers,‘‘Wontok’’ easily got permission to buy a home in Australia, demonstrating the flimsiness of controls on foreign investment.
Demand from China is most obvious in Sydney and Melbourne, and some real estate firms from those cities aggressively market new properties in China, seeking ever bigger commissions as prices keep heading north.
Chinese international property portal Juwai南京夜网 estimated that Chinese investors had spent $5.4billion on Australian real estate last year, 63million Chinese had enough money to invest in overseas property and 90million Chinese searched for property online every month.
Even if that’s only half true, it’s a massive wall of money looking for a home.
It’s not all coming to Australia, of course. Hungry Chinese money is roaming the world in search of investments, and people in many other countries are having the identical debate over whether this is an entirely good thing.
In super-expensive London, most new property sales are to foreigners, and commentators have conceded that London real estate has effectively become a ‘‘global reserve currency’’.
By some accounts Sydney isn’t a million miles behind; nor is Melbourne, where many first home-buyers find themselves comprehensively outgunned when they turn up to bid at property auctions.
Decades ago we had a similar national conversation about Japanese investment.
Most observers believe the wave of Chinese cash will be bigger, last longer and have wider implications for ordinary Australians.
It will be interesting to see, in the long run, what those implications will be.
Will our kids have to hock themselves for life to put a roof over their heads?
If so, will it be because of overseas investment in our local housing markets?