When is a property buyer foreign?

Thanks to Foreign Investment Review Board chairman, Brian Wilson, for providing some clarity into the debate surrounding the operations of  Chinese property buyers in Sydney and Melbourne and for providing some interesting data on the growing diversity of Australia’s population.

Speaking to the House of Representatives economics committee Wilson said: “”I think quite a lot of the commentary is based upon either lack of knowledge of the facts or an inadvertent misinterpretation of the facts.”

He reminded the hearing that about one-in-ten citizens or permanent residents had at least one Asian parent and had as much right as anyone to buy a property. Adding a racial perspective , he observed there were not the same concerns about people of Greek and Italian extraction buying a home.

Wilson said there are between 500,000 and 600,000 sales of residential property each year, of which 20,000 might be brought to the attention of the FIRB.

Submissions to the hearing, which is looking to see whether foreign entities have been circumventing the rules governing offshore buying of Australian property, have suggested there should be better data to determine the scale of foreign ownership in Australian housing.

More attention is being focussed on this area in light of a sharp increase in applications  for what Australia calls its significant investor visa program. This scheme aims to attract large individual investors to Australia on the condition that they invest $5 million into an approved investment scheme for four years. In return they are offered permanent residency and are able to move into the Australian property market.

The significant investors visa requires immigrants to only spend 40 days each year in Australia. Many observers interpret the scheme as enabling mainly Chinese investors to buy Australia property and get an Australian passport on way through as a safeguard if something goes wrong in China in the future.

What it does show is that authorities don’t know what’s really driving the Australian property market. Wilson responded that all ‘information is good but … information is not cost-free,’ pointing out the FIRB had only a limited number of people to examine tens of thousands of property transactions. It was up to the Government to decide whether it wanted to expend resources to broaden the policing in this area.

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