A new University of Sydney report published in the Australian Geographer journal shows that a majority of Sydney residents are opposed to foreign property ownership, as prices in the city have risen dramatically in recent years.
Fifty-five percent of the survey’s 900 respondents disagreed with the idea that foreigners should be allowed to buy property Down Under, with only 4% strongly in favor of foreign ownership. By foreign the respondents meant mainly Chinese, the focus of the survey report.
The research, authored by academic Dallas Rogers, said that there is little empirical evidence to determine whether “the dominant voices in this debate represent broad public views about this issue.”
The research found that 64% of respondents believed that foreign investment was driving up house prices more than other factors such as low interest rates or negative gearing, a practice where loss-making investments made through borrowing are taken as a tax deduction.
The survey reflects a rising debate over the role of Chinese investment which has been heated since 2015. Investment from China in both commercial and residential properties grew by 900% from 2009 – 2015, according to the report.
While Australia doesn’t offer visas to home buyers, it does allow avenues to citizenship through business investments.
Australian Treasury research released last year showed that there is little evidence to indicate the recent spike in housing prices was driven in the main by heavy Chinese buying and that several variables contributed to the uptrend.
Real estate prices in Sydney rose by 45% between 2012 and 2015, while rising at a slower clip in 2016. Prices are surging again this year, with Sydney properties up 18.4% year on year in the first quarter. By the end of last year the median house price in Sydney was nearly A$1 million (US$750,000), putting ownership out of reach for first time or young buyers.
Australia’s Foreign Investment Review Board gave approvals for foreigners to buy homes and apartments valued at $72.4 billion (US$54.38 billion) in 2015-16, an increase of 20% on the $60 billion (US$45 billion) approved over the previous year period.
A recent Credit Suisse report suggests that last year foreigners bought 25% of the new houses built in the state of New South Wales and 16% in Victoria. According to Australian law, foreigners are only allowed to purchase new dwellings, a regulation aimed at driving new building and managing supply.
“Foreign investment is going right where Australia wants it – into funding new housing supply. It is creating jobs, tax revenue and economic growth and – in fact – it is one of the few bright spots of the economy,” Charles Pittar, chief executive at Chinese international real estate site Juwai, told local media.
So then why are so many Australians so adamant that China is pricing them out of their own market? Housing affordability, along with immigration, have become hot button political issues, though to date the focus of populist politicians has been more on Muslim migration than Chinese investment.
One Nation party founder Pauline Hanson, though still on the nationalist fringe, has criticized Chinese ownership of Australian infrastructure and agriculture projects, but the issue hasn’t had much resonance despite a nativist turn in certain recent electoral politics.
The right-wing Party of Freedom has bid to invoke fears of a Chinese “invasion” through property acquisition but likewise has failed to make significant political inroads through fear-mongering tactics.
Still, there are growing concerns that a deluge of illicit Chinese funds could distort local markets, leading to tighter government oversight of Chinese inflows.
While government policy aims to encourage foreign investment, its approach to Chinese capital has been piecemeal and inconsistent. China is currently the fifth largest investor in Australia, lagging the United States and even Belgium, though Beijing was the single largest investor in the country in 2015.
Certain Chinese investments have been subjected to intense scrutiny, including for reasons of national security. Those include the 99-year lease granted in 2015 to Chinese company Landbridge to manage the Port of Darwin in the country’s strategically important north, where Australia and the US cooperate in naval affairs.
The Shandong-based diversified energy company’s bid to takeover Australian gas firm WestSide Corp Ltd was rejected as “undervalued” in 2014, in a deal that would have given the Chinese company majority control over the Meridien gas field in Queensland state.
A Chinese consortium’s bid to buy the Kidman cattle ranch, Australia’s largest private land holding equivalent in size to South Korea, was denied last year by the government on the grounds it was adjacent to a weapons testing site and not in the “national interest.”
It was finally sold to Gina Rinehart, a local mining tycoon estimated to be Australia’s richest woman, and Chinese property developer Shanghai CRED, in a 67%-33% joint venture.
The episode underscored regulatory confusion over the size and type of foreign investment Canberra considers in or against national interests.
While Treasury research claimed the surge in housing prices “does not appear to be attributable to increased foreign demand”, Rogers’ research found, “some participants might be viewing the rapid rise in Chinese investment in Australia as a failure of policy and expect the government to take action.”
Australia has become a haven for Chinese fleeing Xi Jinping’s widening corruption crackdown, with many known to have fled to Australia with ill-gotten gains.
Operation Fox Hunt and Skynet, initiated by Beijing to catch allegedly corrupt Chinese who have fled overseas with pilfered funds, is known to have a list of several people of interest now in Australia.
While Australian authorities have cooperated in some cases, Canberra has refused to ratify a formal extradition treaty due to concerns about China’s politicized and problematic legal system.
In January, The Australian newspaper reported that Australian financial intelligence officials had investigated more than A$3.3 billion (US$2.47 billion) of suspect transfers by Chinese investors, including A$1 billion (US$750 million) in property investments.
According to Transparency International (TI), a global corruption watchdog, there are still many ways to easily launder money in Australia, particularly via real estate transactions.
TI’s research found that Australia had more gaps in money laundering protections than Canada, the US, and United Kingdom – all favored destinations for Chinese investors.
Local real estate companies have long targeted Chinese buyers by advertising properties on Chinese language websites and hiring Mandarin-speaking staff.
Yet their agents are not required to perform probing due diligence on buyers while many housing purchases are still paid in cash, bypassing certain financial reporting laws.
“Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed,” the TI report said.
Australia’s recently released budget showed that the government is concerned about fast-rising housing prices and indicated it will “tighten up” on foreign investment in the sector.
One new measure will impose a A$5,000 (US$3,750) levy on unoccupied homes, which for wealthy Chinese and other foreign investors is an affordable cost.
But with Sydney recently named the world’s second most unaffordable city, and rising popular perceptions the surge in prices has been driven by fast and loose Chinese capital, how the government tightens loopholes on foreign buying will influence perceptions of Australia as open or closed for global property business.