The debate over foreign property ownership is heating up again as politicians head to China to investigate overseas investment in Australian real estate.
Four MPs from the House of Representatives Economics Committee left for China Tuesday as part of an annual political exchange program, according to The Australian
. The trip will also be used to investigate Chinese foreign investment in Australian real estate, amid claims that wealthy Chinese investors are forcing prices up and decreasing housing affordability for locals.
In November 2012, the Significant Investor Scheme (SIV) was launched in Australia, which allows high-net-worth individuals a way to fast-track permanent residence if they invest AUD$5 million into bonds, certain managed funds, or private companies.
This scheme has come under fire recently for allegedly favouring wealthy Chinese investors to snap up property. Nine out of ten SIV applicants are Chinese nationals.
This trip comes amid accusations that Chinese investors are bending the rules when it comes to investing in Australian real estate.
Under current laws, foreign investors are only allowed to purchase new residential dwellings – in a bid to increase Australian housing stock and not push up prices for locals. The Australian
spoke with a leading buyer’s advocate, who says that FIRB is not taking any responsibility to ensure this.
According to The Australian, “…on the FIRB’s watch overseas investors have snapped up more than 5000 established homes, to the value of more than $5 billion, in the nine months to March.” Currently, FIRB is only investigating 33 cases of potentially illegal foreign investment in Australia.
“It’s a drop in the ocean. We see it all the time — foreign investors purchasing established property here… The reality is they (the FIRB) are a toothless tiger,” buyers' advocate David Morrell told The Australian.
Investment in real estate makes up the largest proportion of foreign investment in Australia, according to the latest data from the Foreign Investment Review Board (FIRB)
Approved investment in real estate was $51.9 billion in 2012-2013. This was comprised of $17.15 billion invested into residential property and $34.75 billion invested into commercial real estate.
The majority of foreign investment in real estate, according to the FIRB data, comes from Chinese investment ($5.9 billion), followed by Canada ($4.9 billion) and the USA ($4.4 billion).
According to the latest data from the NAB
Quarterly Residential Property Survey: Q2 2014, foreign buyer market share in new dwellings fell from a high of 13.9% in Q1 to 10.2% in Q2. Foreign buyers were also less active in the market for existing properties, with their share of total demand falling to 7.2% in Q2, down from 9.5% in Q1. First home buyers on the other hand, were more active in the market for existing properties, making up 18.5% of total demand, up from 16.8% in Q1.