Daily Times

Having become the biggest group of foreign buyers a year earlier, Chinese doubled their investment in Australia’s real estate market in 2014-2015. Drawn by the promise of a safe English-speaking country increasingly linked to their homeland by immigration, foreign study and trade, the beneficiaries of China’s rapid economic rise poured A$24.3 billion (US $17.4 billion) into property. But Chinese buyers may now be wondering if their money is still welcome, thanks to a raft of new restrictions on foreign property purchases. In the first half of 2016, Canberra, individual state governments and the banking sector all erected new barriers to foreign buying, the largest portion of which is Chinese. Earlier this month, the Australian Taxation Office announced that foreign residents would be charged a 10% withholding tax when purchasing properties worth over A$2 million, ostensibly to crack down on sellers evading capital gains tax. Described as a “fresh blow to Asian buyers” by a columnist in The Australian newspaper, the move came after three of Australia’s four main banks tightened their rules for lending to foreign purchasers and the fourth, Westpac Bank, banned such loans outright. Just weeks earlier, new rules came into effect to make all inward investment related to “critical infrastructure” subject to oversight by the Foreign Investment Review Board. Local jurisdictions have also put the squeeze on foreign buying: Sydney now requires proof of citizenship and residency, while the state of Victoria, home to second city Melbourne, hiked its tax on foreign purchasers from 3% to 7%. “What it does is redirect capital,” Tony Crabb, the national head of research and consultancy at Savills Australia, told the Asia Times. “So if capital were coming to Australia, it’s charged more for perhaps the same opportunity as you’ll get elsewhere, so the money is going to go elsewhere.” It is difficult to gauge the impact of the changes on Chinese and other foreign buying. Most measures have yet to take effect or only did recently, and other factors such as currency fluctuations greatly affect the market. Nevertheless, there are indications that at least some Chinese have been rethinking Australia as their preferred option. A report by the Asia Society and Rosen Consulting Group found that a massive uptick in Chinese investment in U.S. property was partly the result of the more hostile environment in Australia. “What we’ve seen in the first quarter of this year is extraordinary capital inflows into the United States,” said Crabb. “So it’s not that there isn’t money around, it’s just that it is being redirected into where the best opportunities are.” Chinese investment in property has been a sensitive issue in Australia, home to the most expensive houses in the world after Hong Kong. While authorities have pointed to other rationale for recent rule changes – from fraud concerns, in the case of the banks, to the belief non-residents should pay their “fair share” in tax, in the case of Victoria – many Australians have blamed Chinese for pricing first-time buyers out of the market by contributing to sky-high prices. Such anxieties even sparked a parliamentary inquiry in 2014 to look into the effect of foreign buying on prices.