Australia is selling off natural resources, farmland and property to China at a “crazy” rate — putting us at risk of becoming the “24th province” of the East Asian behemoth.
That’s according to real estate expert Doug Driscoll, who warned of the urgent need to start a national conversation about foreign ownership of residential property in particular.
While interest from overseas buyers has decreased in recent years, the Starr Partners chief executive said our overall rate of foreign ownership was still alarmingly high.
And he said a report released last month by Chinese international property portal Juwai.com showed there was now an “insatiable appetite” for Australian property among Chinese buyers, with our softening housing market boosting interest.
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In 2017, ANZ found foreign buyers owned up to 400,000 Australian homes. Today, Mr Driscoll estimated that figure would be “close to 500,000”.
ANZ also estimated foreign investors bought between 30,000 and 50,000 new dwellings in 2015-16.
At that rate, Mr Driscoll said it “won’t be too long” before a million homes were in foreign hands, with buyers from China and India the most common demographic.
“It doesn’t take a rocket scientist to wonder what impact that could have on our economy,” he said.
“We’re only a population of 25 million with 10 million dwellings, and if we’re not careful we could be overrun quite easily.”
Mr Driscoll said it was a difficult topic to broach, with those who voiced concerns about foreign ownership often accused of racism.
But he said it was essential to “leave emotions at the door” and look at the facts.
“I’m not being jingoistic or xenophobic. It’s absolutely crazy how much of Australia we’re selling off to China, and it surely won’t be long until they have far more influence in our day-to-day lives,” he said.
“It’s irrelevant whether (buyers are from) China, India, Great Britain or the moon — it lacks foresight.
“I look at the facts, and there’s a really high number of current properties owned and acquired by overseas buyers.”
Mr Driscoll also took pains to point out the difference between local buyers of Asian descent — who are clearly Australian — and overseas residents based outside the country who often leave their properties vacant for large chunks of the year, leading to the “ghost house” phenomenon.
“I’m not saying we should stop foreign buyers, but it should be more difficult because a lot leave their properties empty, which clearly has an impact on the rental market, and those ghost homes also have a wider impact on the microeconomy — what happens to the local coffee shop or newsagent when there are fewer people living in the area than there should be?” he said
Mr Driscoll acknowledged fines had been introduced for foreign owners who left their properties vacant but said they were too small to affect offshore-based “multi-millionaires”.
He said we should strike a balance between New Zealand’s ban on most foreign homeowners and the 15 per cent tax imposed on foreign buyers in large parts of Canada.
“Last year, Chinese developers acquired a third of all residential development sites in Australia — that’s astonishing,” he said.
“We need to be open for business to China and India — they’re the countries with the most foreign investors with a burgeoning middle class of hundreds of millions.
“But we need to introduce stringent rules and regulations regarding foreign investment because the government’s interest should be protecting its citizens.”
He said, at the moment, the only factor that could limit Chinese buyers was restrictions placed by the Chinese government in an attempt to stop local money leaving the country.
Douglas said the proposed scrapping of negative gearing concessions and the drop in Sydney and Melbourne house prices could tempt some Australians to buy in New Zealand.
“I think we might see the emergence of savvy Australian investors learning from foreign buyers, and look to invest in property overseas themselves,” he said.
“Although New Zealand’s Parliament clamped down on non-resident foreigners from buying existing homes last year, Australians – among the largest purchasers of homes in New Zealand – were exempt from this ban.
“Whether you’re looking for a home to live in or an apartment as an investment property, it’s relatively easy for Australian citizens to invest in New Zealand, and it can take as little as three to four weeks to complete a house purchase.”
“If we’re not careful, we could find ourselves in an unusual situation wherein we see an influx of overseas investors buying property here, while our own investors start to purchase overseas. Surely, this wouldn’t be in the Government’s best interest."
Mr Driscoll also said Labor’s proposed changes to negative gearing and capital gains tax — in a bid to make it easier for first homebuyers to get their foot in the door — were unnecessary given first homebuyer activity had already increased in recent years.
But he believes changes to those policies would make property less attractive to local investors, which could impact house prices — and lead to an “influx” of foreign buyers who he claimed were using “ingenious” ways to get money illegally out of their own country, particularly in China where they are only allowed a maximum of $50,000 a year.
“If they are getting this money out of China, then they are finding ways to get it into the Australian system,” he said.
However, a spokeswoman for the office of Opposition Leader Bill Shorten told news.com.au independent experts such as Treasury and the Grattan Institute did not believe changes to negative gearing would affect property prices.
She stressed foreign investors could only buy new properties in the country and that new property was also exempt from Labor’s restrictions on negative gearing — and that both policies were designed to encourage investors to build new housing and not speculate on existing housing.
Meanwhile, realestate.com.au chief economist Nerida Conisbee said changes to negative gearing wouldn’t be enough to entice back foreign investors in droves.
“I don’t think (changes to negative gearing) will lead to a recovery of offshore investment unless we see price growth returning, cut taxes for offshore investors, ease up on finance and have more development,” she said.
“There’s nothing at this stage to suggest foreign investors will be coming back to Australia any time soon.”
- news.com.au and OneRoof.co.nz
