I strongly urge Canada and every other nation which is experiencing a flood of mostly Chinese “investors” crowding out locals in owning homes to do something like this…
As Sydney prices rise to record levels – the Australian city is ranked only second to Hong Kong as major cities with the world’s least-affordable housing – new potential homeowners have been increasingly forced out of the market with foreigners blamed as a key factor the AFP reports.
We can only assume that China’s infamous offshore money laundering nexus of Vancouver did not make the list because some Chinese oligarch paid enough money to make that particular city name disappear.
Sydney (pictured) is ranked only second to Hong Kong as major cities with the world’s least-affordable housing
As for Sydney, the crackdown on foreign oligarchs is long overdue: “the governments want to respond to a perception about housing affordability and the impact of foreign investment on that,” KPMG Australia’s indirect tax specialist Michelle Bennett said. “(Politicians) are raising money from people who aren’t voting, so superficially you can understand that it’s possibly not bad politics,” she added, but warned the measures could be a “blunt instrument” that could hurt the market.
As AFP notes, last year, leading apartment developer Lend Lease sold out more than Aus$600 million (US$445 million) worth of new units in Sydney’s Darling Harbour in under five hours, with the Australian Financial Review reporting that one-third of buyers were foreign. Lend Lease said the sale broke local records but such reports have also fuelled calls for government action to protect Australian buyers.
Prior to Sydney’s move, other Austrlian states had already implemented protections and in response to China’s unprecedented influx of cash, the New South Wales, Victoria and Queensland state governments have introduced or are set to slap new property and land taxes on foreign buyers, sparking an outcry from developers fearful that they will flee to other markets such as New Zealand and Canada. “It is very bad. Without the Chinese nothing would ever get built,” the country’s richest man and head of prominent developer Meriton, “high-rise” Harry Triguboff told the Australian Financial Review last week.
To emphasize his point, Trigubov decided that it’s appropriate to swear: “Never mind the bullshit stories, sales volumes have already dropped and prices are coming down steadily. The Chinese buyers are already disappearing.”
We are confident millions of locals who are completely priced out of the market, would have a comparably angry response.
Furthermore, predictions of the collapse of Australia’s housing market are greatly exaggerated: the proposed tax in Sydney’s New South Wales state to be announced this week would be only 4% , in Queensland it is 3% and in Victoria 7%. The island continent experienced an average 7.25% annual housing growth over the past three decades according to the central bank, attracting Chinese investment into commercial and residential real estate.
As AFP adds, the Chinese invested Aus$4.2BN in 2011-12, rising to Aus$24.3BN in 2014-15 according to Australia’s Foreign Investment Review Board, making them the largest overseas buyers. But foreign investment – including in local firms and agricultural land – is politically sensitive and last year the national government forced some offshore owners to sell properties after tightening regulations.
Housing affordability, and the role of property investors, has also been a key battleground ahead of national elections on July 2.
Still, now that much Chinese demand will shift away, many are already lamenting the “inevitable” Australian housing bubble burst: “with housing prices appearing to be coming off the boil and the economy transitioning away from a mining boom, analysts say the state taxes could backfire.
“It’ll have ramifications down the track when the market goes through a pretty significant downturn in terms of construction and developers are finding it hard to get projects going,” BIS Shrapnel’s managing director Robert Mellor said.
Signs of a softening housing market could also be why states appear to be trying to “grab some revenue while it’s on offer”, leading property data provider CoreLogic’s Australia research head Cameron Kusher said.
In any event, it remains to be seen just what the impact of the next tax will be: “the people that are buying for the long-term… maybe at some point to migrate to Australia, I don’t think it would act as too much of a deterrent for them,” he said.
And should the Chinese balk at the Australian market, concerned about further tax increases and more punitive measures targeting foreign investors, the biggest losers would once again be Vancouver (and Toronto) residents, where home prices will get even more exponential-er, as every last Chinese buyer focuses on the one country that no matter how obvious the bubble, simply refuses to do anything and implement similar or not so similar taxes and other barriers to foreign purchases.