The Great Australian Housing Sell-off (To Foreigners)

If you look at the figures of the Overseas Search Report for October 2023, they state that interest from overseas property seekers is skyrocketing due to recent record migration. Their chart shows the annual change in buy and rent search volumes from overseas property seekers. I guess it’s no surprise that the biggest increase in buying interest was from China at 36.9%.

Unsurprisingly, as the number of migrants increase, so does the number of people searching for a place to rent. The chart shows the number of permanent visa holders and student arrivals, which directly correlates with the number of rent searches. If you want to know why there’s a rental crisis, well, here’s one of the reasons. But for whatever reason, the Government refuse to reduce immigration. They obviously get some sort of economic benefit from it. If struggling Australians can’t afford a house or find a place to rent, “So what!”, they say, “Consequences be damned!”.

“Australian homes are no longer for Australians”, “Chinese outrun other foreign buyers in dash for housing”, “‘Nuts’: Why millionaires are flooding into Oz”. It’s a good question.

Here’s a map from Visual Capitalist. According to the Henley Private Wealth Migration Report 2023, more than 13,000 millionaires are expected to have left China by the end of this year, the most of any country, and guess where they’re going? You guessed it, Australia! Australia has reclaimed the top position for net millionaire arrivals. Wealthy Chinese love Australia. According to realestate.com, “Australia now top destination for cashed-up Chinese homebuyers”. But why Australia? And where’s all this cash coming from?

Well it all started over a decade ago. In 2009, then Prime Minister Kevin Rudd, made the somewhat shortsighted decision to allow temporary migrants to purchase established housing resulting in a subsequent boom in temporary migration boosting demand for Australian homes.

Secondly, apparently Australia has one of the weakest anti-money laundering laws in the world, which has made Australian property a great way for laundering dirty money, no questions asked. There are talks of reforming this, and Australia did agree in 2003 to introduce global ‘Tranche 2’ anti-money laundering regulation, but federal governments from both sides repeatedly delayed its implementation. A report from Paris-based Financial Action Taskforce from 2015 warned that Australian residential property is a haven for international money laundering, particularly from China with billions of dollars laundered in Australian property. Of course, many real estate agents do not want these regulations, because that would end their lucrative gravy train.

Peter Li, principal at Plus Agency, is a self-described property guru who mainly deals with Chinese buyers, said, “Foreign buyer inquires have quadrupled from last year, and sales have doubled. International buying will definitely increase during the next year. There is more activity in terms of flights, so it’s increasingly easier to get in and out of Australia.”

No, this is not a Giorgio Armani fashion catalogue, this is luxury property developer PB&Co in the affluent suburb of Toorak in Melbourne. Buyer’s agent, Alex Bragilevsky, recently said, “I have facilitated $135 million of real estate deals in Toorak in the past six months with 90% of my clientele from China. They come to Melbourne on a private jet, and I’ll meet them at the airport with a nice car. Then we go out and look at real estate.” David Morrell, director of Morrell and Koren, a top-end real estate firm, described the foreign buyer situation as “nuts”. He said, “We are seeing jumps of $2-3 million dollars on properties. We have a market place that is disproportionately being sold to Chinese buyers, relative to the rest of the population. What’s happening in Toorak is only a look at what is happening under the blankets, across the country.”

And lastly, there’s also a special type of visa that essentially facilitates money laundering in Australia, the so-called ‘golden ticket’ visa, the Significant Investor Visa, which was introduced by former Labor Treasurer Chris Bowen in 2012, and requires the applicant to invest $5 million in Australia. It has operated for more than 10 years with almost zero rejections with Chinese citizens making up around 90% of successful applicants. Noting that at the time of recording, “Direct investment in residential real estate is prohibited. Indirect investment in residential property through managed funds is strictly limited.” This visa is not permanent, lasting five years, but you can bring your family with you, and you can apply for a permanent visa at the end.

Basically, if you’re rich, even if the source of your money is questionable, you can come to Australia and buy a house, pumping up the property market, pricing locals out of housing, with Australia remaining a global magnet and shelter for dirty laundered money.

MUSIC
Allégro by Emmit Fenn