There’s still no good data on foreign buying, and the foreign investment review board has decided to lecture the community rather than do something about it. The current government inquiry seems as useless as every other government inquiry, and this issue isn’t going away.
For a few years I’ve been highlighting the major role foreign buyers, particularly Chinese buyers, are having on the Australian property market. And I’ve also been highlighting what I think is a political ticking time-bomb.
That is, Chinese buyers are helping to drive prices higher, but that always alarms the ‘think-of-the-children’ brigade, worried about first home buyers being priced out of the market.
Combine that with an absence of any useful data, and anecdotal reports flying here there and everywhere about people rorting the system – non-residents buying existing properties for example, and you have a classic us vs. them mentality.
Rich Chinese buyers vs. poor local kids. I personally don’t think that’s the reality, but it’s easy for someone to paint the picture. It’s a ticking time bomb.
And the fuse was lit a few months ago, as the government launched a review into foreign property purchases.
Like most government reviews, it hasn’t turned up much of use, but there were some particularly useless contributions over the past week – and from agencies we hope should know better.
The first was from the Foreign Investment Review Board’s chairman Brian Wilson. He told the inquiry, that Chinese Australians are often unfairly targeted by people concerned that rules are being broken.
In his words:
Very often we might get a call that says a Chinese person has bought this house, how were they able to do so. A lot of the time when we investigate their background, we find they are a citizen, they live here.
We don’t often have concerns about people of Greek or Italian extraction buying properties because they are not so easily identifiable at auctions.
Ok, that’s great Brian, thanks for the sermon. The whole drama is caused by our nervousness about Asian-looking people buying properties. If you’ve got concerns about unregulated Chinese buying, he’s not saying you’re racist, but some of your best friends are racist.
And it completely ignores context. We’ve got newspapers full of stories about offshore Chinese buyers pumping demand. John McGrath reckons he’s never seen anything like it. We’ve got Chinese language property search portals on the internet marketing straight to the Chinese, and concierge services driving wealthy buyers all over Sydney’s north shore.
Last time I looked, nobody was catering directly to the Greek market.
And so this is the context that’s got people wondering about Chinese buyers at auctions. It’s not if they’re Chinese per se, it’s if they’re part of a poorly regulated wave of Chinese cash.
It’s got nothing to do with what they look like.
And it’s a cheap shot when your organisation is part of the reason why there’s so much suspicion floating around. It’s because there isn’t enough data on what’s actually going on. And with government agencies like FIRB dropping the ball, we’ve had to rely on private banks to step into the breach.
And that data, like the NAB survey of property insiders, indeed shows there’s been a spike in Chinese buying, and it’s much bigger than what the FIRB are telling us. Take this chart here:
And it seems like shameless pass-the-buck when it’s your organisation’s checks and processes that are being called into question. There are serious doubts about whether FIRB data is getting anywhere near the extent of Chinese buying, or actually preventing non-nationals from buying existing properties.
It’s all looking a bit leaky. And that’s what this inquiry should be trying to sort out. Have we got the system we want, and if so, is the system working?
Don’t lecture us about racial bias, when it’s your organisation that’s created the whole mess…
The other piece of wet-lettuce analysis came out of the RBA. They reckon foreign investors are not crowding out first home buyers.
They say that foreign investment in residential housing is at most 5 to 10 per cent of market turnover, and last year the government approved $17 billion in property investment from overseas, with most of the money funding the purchase and construction of new homes.
They then say that since foreign investors’ share of the market has remained fairly steady over the past two decades, overseas buyers were not the main reason for price rises over the period.
Ok. But I thought the whole point of this review is was because no body believed the FIRB data. Or was I just hoping.
And you can’t argue that since FHBs are looking for affordable, entry-level homes, and cashed-up Chinese buyers are looking for premium homes in premium suburbs, one’s not crowding out the other.
It’s not like the car market. In that case, demand for Mercedes has no influence on demand for Honda Civics. If demand for one goes up, Mercedes or Honda simply produces more of those cars.
But that’s not the case with housing. You can talk about different markets, premium vs entry level, but really it’s all one market. If someone comes in and buys a premium property, it stops people in medium level housing moving up, which stops people in entry level housing moving up, which stops entry level homes form opening up.
It’s all connected.
The RBA got someway towards acknowledging this when they said that there were
“rigidities” in the supply of housing that meant there were not enough new homes being built to meet demand.
And again, more than foreign buying, this is what’s pushing up prices.
Looks like this inquiry’s going nowhere. Prices will keep rising, Chinese buyers will keep coming (legally or not, but we’ll never now), and people will keep wondering if wealthy Chinese buyers are the reason their kids can’t afford a home.
We haven’t seen the last of this.