Rich foreigners are buying their way into the country and stealing our homes.” It’s only a matter of time before this becomes a catch-cry on talk back radio. For the sake of the market, and the country, we need to get on top of this.
I keep a close eye on Canada. Politically and economically, we tend to move pretty close together.
That’s why it was interesting last week when Canada scrapped it’s controversial Immigrant Investor Program. The scheme is basically just a way for rich people to buy permanent residency.
Trouble was, they under-estimated how rich the developing world, particularly China, was getting, and how fast.
As I’ve said before, China is creating 25 billionaires a month!
In that context, the paltry sum required for a Canadian Visa was barely loose change.
To qualify for the IIP, all you had to do was “loan” the Canadian government $800,000 interest free. At the end of 5 years, they gave it back.
What billionaire would even blink?
And so there was a phenomenal surge in visa applications. Embassies stopped taking applications once they had something like 50,000 in the backlog. Last week, they scrapped it altogether.
The scheme had been copping a lot of flack. It was pretty unpopular.
But I wonder if many Australians know we’re running pretty much exactly the same scheme here, though the terms are a little less generous – but not by much.
To buy an Aussie Visa, you need to be bringing $5m into the country with you. But it doesn’t seem like there are clear guidelines about where that money needs to go. In fact, like Canada, a lot of it goes into government bonds.
The New South Wales government mandates that applicants who want to come to NSW must allocate at least $1.5 million to buy Waratah Bonds.
So let me get this straight. In order to buy your way into the country, you’re “forced” to invest a good chunk of wealth in some of the safest and highest paying bonds in the world?
And I thought our governments, with their gold-plated credit ratings, had no problem securing cheap finance from the markets. Do they really need to be propping up demand like this?
And is it worth selling residency for?
And why we are we attracting business leaders with significant assets, only to force them to buy the most riskless and brainless assets on the market?
I think the basic idea of an investor program is a good one. If you want to come to the country, start up a business, employ some locals, help Australia compete in a global economy, all power to you.
I’ll personally be rolling out the welcome mat.
If the program was about attracting talented business people then I’d be all for it. If you ask me, entrepreneurs – and from all parts of the world – have made Australia what it is.
But the problem is that the program uses wealth as a proxy for entrepreneurship and business nous. That’s just not always the case. Particularly if the biggest determinant of wealth in your country of origin is your ability to milk party political contacts.
And it sticks in the throat a bit. We’re very serious about border control. Unless your rich. Then you can do what you want.
It’s a recipe for the kind of resentment that brought down Canada’s program.
The government needs to get this straight. The fear I have is that immigrants, especially the long-suffering Chinese, will end up being scapegoats for problems that have nothing to do with them.
The latest data show that the new government has ramped up investor visa approvals. 73 visas were approved in the last two months of last year, compared with 15 approvals through the life of the Labor government.
Australia is open for business, apparently.
And my fear is that housing is going to be a flashpoint in this conflict.
We already know, especially if you’ve been reading my blog, that Chinese buying is having a huge effect on the market.
Foreign buyers are already making up a fair chunk of new and existing home sales. Something like between 10 and 15 percent. This chart here comes from NAB.
But these are national figures. It’s quite likely that in markets like Sydney and Brisbane, the shares are much larger.
Juwai.com estimates that 63 million Chinese are now wealthy enough to buy overseas. They say Australian buying has increased 9-fold in the past three years.
More and more companies are marketing real estate directly to China. I was on realestate.com.au last night scouting out a few properties and this banner came up:
And we know all this Chinese buying is having a big impact on prices. The danger this creates is that we’re setting up the situation where our first-home buyers are seemingly in competition with the Chinese.
Now, theoretically, you can’t buy here permanently unless you’re a permanent resident, but there doesn’t seem to be anybody policing that. And the Foreign Investment Review Board has been keeping very quiet on what’s actually going on.
A Fairfax journalist put in three separate freedom of information requests. All he got back were four pages covered in white-out.
So you can hear the loony fringe now can’t you?
“The Chinese are stealing our homes!”
We need to get on top of this.
Even if that means putting a bit of a break on foreign buying for the time being. Australian property has its own head of steam. The market is moving into cyclical strength. We can afford it.
Because if we don’t get on top of it – and even just getting some actual stats on what’s going on would be a start – then I worry it’s just going to going to create a climate for much more reactionary, and potentially racist, policy responses in the future.
And for the market, and the country, that’d be a real tragedy.