Another day and another serve of property spruiking bilge – once again on Chinese buyers, this time on reputation damage if the China buyer phenomena is questioned much at all.

Caution urged as foreign property investment faces political change

Jul 9, 2016  Emily Power

Prestige reporter

http://www.domain.com.au/news/caution-urged-as-foreign-property-investment-faces-political-change-20160707-gq0aeu/

 

Real estate experts are cautious about the future of Australian foreign investment after the chaos of Brexit, the rise of Pauline Hanson and new tax hikes.

International property experts are cautiously watching the future of Australian foreign investment following the chaos of Brexit, the rise of Pauline Hanson and new tax hikes for overseas buyers.

Hanson and One Nation’s parliamentary allies could threaten international confidence in Aussie bricks and mortar and harm its reputation if their influence was to grow — under any Senate voting bloc with likeminded parties — real estate commentators believe.

Let’s start by putting ourselves in the minds of a foreign buyer of Australian real estate.  I would be thinking to myself that here is a nation which………..

  • has been proven to ask no questions about who buys real estate whatsoever
  • has been proven not to ask questions about the acquisition process of funds used to purchase
  • appears to not ask about whether the foreign buyers are buying a product which actually serves an economic purposes for nation (beyond maybe the actual construction)
  • appears not to ask about the social implications or costs involved in placing large numbers of foreign owned uninhabited apartment buildings in the centre of two of its largest cities
  • appears to have little/no regard for whether individuals investing in Australian real estate are breaking the laws of another nation simply by moving money to Australia in the volumes required to invest in Australian real estate, and the ensuing geopolitical/legal implications of this.

From there we could consider how many other nations adopt the same posture with regard to foreign buyers of real estate (as well as how many are now starting to question if they should be considering foreign buyers of real estate more closely, and how many have recently changed their positions on encouraging unquestioned foreign real estate purchases – including Canada/Vancouver, New Zealand & the United States – which have all started tightening up in some way).

The after that, the opening stanza lines up 3 issues.  Brexit, Pauline Hanson, and new taxes for overseas buyers.

Deputy director of the Australia-China Relations Institute at the University of Technology Sydney, Professor James Laurenceson, said sophisticated Chinese investors understood there were many voices in Australian politics.

“What would cause real damage is if the likes of Pauline Hanson and others antagonistic towards foreign investment started having an impact on the policies of the major parties and our approvals regime,” Professor Laurenceson said.

Opening the account from here is the regular pro-China spruiker, Professor James Laurenceson – who presumably makes a good career out of his pro-China lobbying.

He starts out by suggesting that sophisticated Chinese investors (with no indication as to whether the ones investing here came into this category, or whether it should be assumed that because they invest here then they are by definition sophisticated) understand that there are many voices in Australian politics.  Presumably this is something of a surprise for many of them used to lots of voices all arguing the same line on issues relating to national policy – see Chinese media discussions of the South China Sea arbitration case as a good example – and one wonders if the sophisticated Chinese understand that the voices in Australian politics help to promote the idea that the body politic doesn’t leave issues unaddressed which the major parties don’t wish to think about, without losing voters to parties who will address issues which are significant for voters.

One gets the idea that Professor Laurenceson (though it may be confronting for any Chinese used to the idea that politics is monolithic and not influenced by players outside the party in control) is alert to this when he questions if the minor players (one assumes he means Pauline Hanson and Bob Katter – both of whom have raised concerns about the lack of regulation on foreign nationals buying Australian homes, and the money acquisition process which facilitates this) may actually have some influence on the major parties.

At this point we may find ourselves wishing Professor Laurenceson could do a refresher of ‘Parliamentary politics in the Westminster System 101’, because that is pretty much what the system entails.  Mainstream parties are likely to have to pay some heed to sentiment questioning the economic value and social implication, as well as the legality and money accrual processes involved, of foreign nationals buying Australian homes, if they rely on those minor players, for whom this may be a significant issue, for their control of parliament.  Indeed this realisation is presumably what is driving this particular piece in Fairfax, although we could ask if professor Laurenceson is actually remotely interested in any ‘international’ perception of Australian real estate laws applying to foreign nationals and is solely concerned about the Chinese perception.

 

“The way the approvals regime is currently structured is already unhelpful to Australia’s international standing. We have an absurd situation where an American investor can buy Australian agricultural land worth up to $1.1 billion without needing any Foreign Investment Review Board clearance, while Chinese investors need approval if the value is just $15 million.

“Any further moves in this direction would come at a very high cost to our reputation.”

 

Professor Laurenceson then suggests that the current approval process is unhelpful to ‘Australia’s international standing‘ through an ‘absurd’ situation because it tilts

in favour of

  • a nation (The United States) with whom we share very close economic, cultural, legal, political, military ties, and have done for more than 50 years, and where Australians can buy agricultural land unimpeded

And not as favourably towards

  • a nation (China) from whom we have major problems retrieving Australian citizens in legal trouble, which has a mutually unintelligible legal system, is a profoundly corrupt one party dictatorship, with clear limits on the movement of capital to levels well below that which would be required to buy Australian real estate, and where Australians are not allowed to buy agricultural land.

Thanks for that, Professor.  Maybe your next field of study could be ‘Relative influences on absurdity identification in the Australian mainstream media’.

He suggests that any ‘further’ moves in that direction would come at a high cost – or presumably reduce the flow of capital into Australian real estate, which would be what some want unless there is further progress on:-

  • substantiating the economic benefit for Australia,
  • substantiating the social and economic implications for Australia,
  • substantiating the veracity and probity under Australian law of the process which funds used in the process are accumulated in foreign nations, and
  • substantiating the implications for Australians wanting to own their own home accumulating their capacity to do so under Australian laws and tax regimes

 

Australia’s property market has been a target of race-based protests in the past year 12 months. Protesters from Party for Freedom lashed out with “foreign ownership is economic genocide” placards at several Sydney auctions, and dropped letterbox leaflets attacking Chinese buyers as “invaders”.

 

Note the use of the word ‘protests’ (suggesting more than one) – there certainly was one in Sydney, and from the coverage it managed to attract about a dozen people, far less than the number of foreign nationals who attend numerous auctions in Sydney and Melbourne each weekend.

foreignbuyerprotest2

5 protesters here……….

Without having any idea about what the ‘Party of Freedom’ is on about the idea that “foreign ownership is economic genocide” may have substance unless a nation clearly establishes

  • the economic benefit for Australia,
  • the social and economic implications for Australia,
  • the veracity and probity under Australian law of the processes which funds the process are accumulated in foreign nations,
  • and the implications for Australians wanting to own their own home accumulating their capacity to do so under Australian laws and tax regimes

Would Professor Laurenceson suggest that Australia not ask such questions of a phenomena happening in Australia?

 

foreignbuyerprotest1

Protesters not showing enough aggression to unsettle some old biddies here……….

And as for the letterbox leaflets and ‘invaders’ name being bandied about, well I think a glimpse of the Chinese press will see the same sorts of epithets bandied about quite regularly, and presumably the letterbox leaflets needed to be sorted from the real estate spruiking materials (which would have been far glossier and with better pictures) and may seem somewhat tepid in comparison with the treatment Chinese buyers of Australian real estate may have seen afforded protesters in China.

 

Professor Laurenceson called for a bipartisan stand against anti-foreign investment sentiment.

“If that happens, then Chinese investors will have confidence that despite the more extreme voices, Australia’s political system is robust enough to keep them away from the mainstream and from influencing policy,” he said. “It also would help if trade unions in the construction sector spoke up. After all, it’s their members that get jobs because of Chinese investment.”

 

Professor Laurenceson, opens up with what any IR practitioner refers to as the ambit claim – though one does wonder if he is concerned most about anti-foreign investment sentiment or anti-Chinese investment sentiment. He also tosses the dog whistle of jobs, and surprisingly runs a call for Union support, possibly assuming Unions are so desperate that they too will take part in the spruik

 

That lack of political nous he exhibits seemingly denies him awareness that currently there is a lot of concern about Housing prices in Australia, and the millstone these place around the neck of the national economy, in terms of both the malinvestment it creates and the massive debt Australians need to go into to buy a house (when we need to tax those people to pay for entitlements for the people who own the houses) and that that concern is now starting to coagulate around a few core issues, including:-

  • Planning policies
  • Bank lending policies
  • Speculation/negative gearing/super, and
  • Untrammelled foreign buyer access.

With regard to the last we have already had a Senate inquiry and the Kelly O’Dwyer inquiry come to the conclusion that

  • The FIRB doesn’t look at foreign buyers and hasn’t done for a long time,
  • That foreign buyers are a very significant impact in particular markets in Sydney and Melbourne in terms of lifting prices,
  • That Real Estate agents are promoting Australian houses overseas quite heavily (and often in contravention of Australian laws); and
  • That consequently  a significant (but undetermined) number of Australian houses are owned foreign nationals when they perhaps shouldn’t be, and Australian regulatory authorities don’t know where when or for how long.

For many Australian voters the bipartisanship he looks for has been experienced as a political system which had a bipartisan position on not looking at.

  • Negative Gearing
  • Super concessions
  • Population Ponzi
  • Tax cuts for global business
  • Free Trade Agreements
  • Not addressing the behaviour of Australian banks (who it would appear have been lending to foreign buyers of Australian real estate backed by the Australian government); and (most importantly for Professor Laurenceson’s call for Bi Partisanship)
  • Foreign buyers of Australian housing (particularly existing Australian housing) and the extent to which this facilitates money laundering in Australian real estate – particularly given that we don’t ask anything about how the money is earned in the first place, how many of the foreign buyers are from China, China has a major corruption crackdown underway (which has identified Chinese nationals in Australia who have bought Australian houses without any difficulty) and this places those money launderers into an advantageous position in comparison with those legitimately earning money in Australia paying Australian taxes and complying with Australian laws.

The Bipartisan position of mainstream politics on these issues has lead to some disenchantment with major parties.   Professor Laurenceson presumably doesn’t quite get that a clearly stated bipartisan position committing to further untrammelled access for foreign buyers of Australian real estate (along with the other issues mentioned above) may have the effect of encouraging more voters to drift towards the Katter/Hanson minority end of things, which presumably is what he wants to avoid.

 

Indians are tipped to be the next trophy home buyers, with India’s economic growth this year expected to surpass China’s and increasing individual wealth.

New Delhi’s only luxury home show is advertising for Australian property developers and marketers to exhibit at its October event, the International Real Estate Expo. Show director Vimal Anand said while internal politics would not taken into account by investors, “anti-foreign investment movement should not grow”.

 

This is the ‘look over there’ bone being thrown to anyone wanting to get ahead of the next potential wave, in order to distract from dealing with the wave in play right now.  The only real things to note are that India too has massive corruption problems, but that Indian law is far more compatible with Australian law than Chinese, and many Indians speak perfectly reasonable English (meaning they don’t ordinarily require translators when they attend Australian auctions) and may not attract as much attention as their Chinese counterparts.  There is some sentiment that Indian buyers are far more often looking for a place to live in Australia (and for places in which they will live) than just looking for places to store money while remaining on the teat in some other land.

 

RMIT University property researcher Peng Wong described Hanson’s platform as “negative marketing”, but he is more closely monitoring the effect of a beefed up foreign buyer tax in Victoria from July 1.

Overseas buyers of NSW property have also been slugged with a 4 per cent tax and foreign buyers in Queensland face a 3 per cent tax following last month’s state budget.

Mr Wong said the outcome of the Victorian surcharge, which was lifted from 3 to 7 per cent, was too early to call, but, he said, similar tax rises in Hong Kong caused house prices to drop 20 to 30 per cent.

“Singapore did the same thing, imposing a 15 per cent stamp duty on foreign buyers, and as a result the market has come down — not as drastically as Hong Kong’s, but Singapore’s market has never recovered,” he said.

“In our studies, government policy is so important as far as the impact on foreign investor sentiment.

“Perhaps it is too premature to predict what will happen, but historical events speaks for itself.”

 

RMIT University property researcher Peng Wong is the next batsman at the crease.  He plays himself in with the reasonable observation about Hanson, and generally reasonable comments all round, but with the ‘journalist’ writing the article slipping the emotive term ‘slugged’ into the piece around him in reference to the various surcharges brought in by state governments to account for the fact that foreign buyers (most not earning and paying taxes in Australia) contribute sweet FA to the provision of local services, and that their ‘investment’ looks a lot like speculation or money laundering, making a social good more expensive and when the state governments would like ‘investment’ which is more overtly productive after the initial construction phase.

He raise the prospect of a 20-30% downturn in prices and a non-recovery in Housing in Singapore, but he doesn’t question whether precisely these outcomes would in fact benefit large numbers of Australians (though possibly punishing those who have gone heavily into debt to speculate on it as well as Australian banks to the extent they have funded that speculation).

 

Similar instability has rocked the UK in the wake of Brexit. Knight Frank project marketing director Richard Drummond said that typically, overseas investors avoided shaky markets.

“There is confidence around regulation, people trust the Australian property market,” Mr Drummond said.

“We may not be able to get the huge volumes (of sales) we have achieved in China in the past, but we’ll see more of Singapore, Hong Kong and Malaysia, and I think that is probably where the growth is.”

 

Richard Drummond from Knight Frank is the next man in, after a statement suggesting the journalist has heard of Brexit but doesn’t wish to explain why it would have an effect on real estate in the UK (would that be if ‘investors’ were actually speculators?).  As a project marketing man for a real estate agent he makes a statement of the blindingly obvious about foreign investors and shaky markets, and then talks up (waxed and loquacious) the Australian market.

 

Mr Drummond said the push for Australian property from overseas buyers had slowed.

“Last year we had a strong rush in May and June — we had a sales person signing up a deal at 11.30pm on June 30 on the bonnet of a car in South Yarra, but we didn’t see that sort of activity this year,” he said.

“It has softened a little bit but it may be the projects that we are selling, in West Melbourne, Northcote, South Yarra, Blackburn, Templestowe, Hawthorn — so, not big CBD projects on the go at the moment, so we are not as exposed to the FIRB market.”

 

A reference to slowing Chinese (no mention of capital control crackdown or corruption crackdown behind that) a little bit of cameo porn about car bonnets in South Yarra, and a throw away about no projects in the CBD (so no worries about FIRB – which has not worried a single foreign buyer of Australian real estate in 10 years).

 

So there we have it.  This weekends ‘questioning foreign buyers might be racist’ spruik in Fairfax essentially revolves around one set of comments from a constant China real estate spruiking academic, who obviously doesn’t have a good take on Australian politics.  This is a classic example of a piece where the journalist has no real story but has been told to follow a line and wrapped essentially the exhortations of Laurenceson (the only person suggesting anyone exercise caution – though presumably not on whether Chinese buyers are international buyers are one and the same, and certainly not on the ability of Chinese nationals to buy Australian real estate, or agricultural land) around the other quite reasonable comments.

 

The article posited discussion of three issues in its opening paragraph – Brexit, Pauline Hanson, and new taxes for overseas buyers – what we got was almost no discussion of Brexit or State taxes, and a big dollop of anti-Hanson pro-China spruik (half heartedly masquerading as concern about ‘international perceptions’) from an identity we know will spruik for China any time he gets into the public domain.  Thanks for that Fairfax.

 

………..Finally – and this will hopefully (although I know it wont) head off the invariable claims of racism which are likely to be directed towards me for raising the laughable quality of the press spruiking done in the Fairfax media directed towards supporting offshore Chinese buyers of Australian Real Estate – I would just like to close by stating that I dont really care how many Chinese people migrate to Australia, and I dont have a general problem with the idea of large scale migration from China.  What I do have a problem with is the idea that significant numbers of Chinese (or any other nation) would buy so much real estate in Australia that it would (in conjunction with other factors in the market) impact on the local market to the point where it begins to price Australians out of access to owning a home, and where such migration place such strains on existing societal infrastructure to the extent that local services are diminished for users because of the increased demand – particularly where the economic case for such levels of migration isnt being made in that it neither makes us more competitive, it provides no badly needed employee types, and doesnt stimulate local small business investment; it just adds to the number of bodies here soaking up whatever they can from whatever productive ventures we do (which at the moment are about mining, using small numbers of people).  


My other major issue with the large scale purchase of Australian real estate by Chinese nationals  (and this observation would apply to any other nation) is that the funds used to purchase real estate (a social good) in Australia have a probity and veracity which is equal to the PAYG taxpayers who need to take out mortgages in Australia, and that it is free from all claims of corruption and overtly examined with respect to any such claim well before it is permitted to buy Australian real estate.  I also believe that any large scale migration into Australia should be part of a clearly articulated economic policy, not simply to sustain demand with more people providing demand.  Without that economic policy justifying it, without the probity of the money supporting it, without the planning by all levels of government to facilitate it, I dont not believe that continued large scale migration into Australia makes much sense at all.


The post above, however is not about Chinese migration.  It is about the utter spuriousness of media commentary designed to support real estate prices.