Sunday, June 19, 2016

Chinese investors is crowding out locals and killing the “Great Australian Dream” of owning property

Australia is an appealing market particularly after Hong Kong and Singapore introduced a 15 per cent property tax on non-local buyers and as the local dollar weakened against other currencies.

The proposed tax in Sydney’s New South Wales state to be announced this week would be only four per cent, in Queensland it is three per cent and in Victoria seven per cent.

The island continent experienced an average 7.25 per cent annual housing growth over the past three decades according to the central bank, attracting Chinese investment into commercial and residential real estate.

Chinese invested Aus$4.2 billion in 2011-12, rising to Aus$24.3 billion in 2014-15 according to Australia’s Foreign Investment Review Board, making them the largest overseas buyers.

But foreign investment - including in local firms and agricultural land - is politically sensitive and last year the national government forced some offshore owners to sell properties after tightening regulations.

Housing affordability, and the role of property investors, has also been a key battleground ahead of national elections on July 2.

But with housing prices appearing to be coming off the boil and the economy transitioning away from a mining boom, analysts say the state taxes could backfire.

“It’ll have ramifications down the track when the market goes through a pretty significant downturn in terms of construction and developers are finding it hard to get projects going,” BIS Shrapnel’s managing director Robert Mellor said.

Signs of a softening housing market could also be why states appear to be trying to “grab some revenue while it’s on offer”, leading property data provider CoreLogic’s Australia research head Cameron Kusher said.

Meanwhile, there are question marks about whether current data adequately captures the full extent of foreign investment in Australian real estate, with some statistics not delineating between commercial and residential property purchases.

In one estimate, University of Sydney researchers last year said offshore Chinese purchases only totalled two per cent of all transactions in 2014 out of overall residential home sales of Aus$270 billion, the Sydney Morning Herald reported.

Despite the new tax hurdles, Kusher expects long-term Chinese housing investment to continue.


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