Those wondering about Australia’s interminable house price rises may have read our blog post explaining immigration is one of the leading reasons prices remain elevated despite the fastest increase in interest rates in Australia’s history.But the flavour of that immigration should be drawing the ire of home buyers who find prices unaffordable. And that ire may justifiably be directed at one particular political party – although the other didn’t do much about it.
In 2023, Australia regained its status as the top destination for net millionaires globally, drawing attention to a significant factor contributing to this phenomenon. As reported on News.com.au, recent data from various sources, including the Australian Treasury, real estate professionals, property portal Juwai IQI, and PropTrack, all point to a remarkable surge in overseas demand for Australian housing.
NAB’s latest residential property survey among real estate professionals reveals a sharp increase in the proportion of Australian homes sold to foreign buyers since the country’s borders reopened in late 2021. Foreign buyer interest, particularly from China, has reached record highs, as evidenced by overseas searches on realestate.com.au, reported by PropTrack.
Indeed, the Australian Treasury has reported a 40 per cent increase in approvals for foreign purchases of Australian homes in the last quarter compared to the previous year. Mainland China, Hong Kong, Taiwan, and Vietnam lead the way in foreign buyer approvals. Meanwhile, Juwai IQI has also ranked Australia as the number one choice for Chinese buyers, with Chinese buyer inquiries through Juwai surging by 158 per cent in the third quarter, while local agents catering to Chinese buyers have witnessed a significant increase in inquiries and sales.
The factors that have converged to make Australian housing particularly attractive to foreign buyers are likely to be of particular interest to Australian residents as well as the Federal Police.
The seed of today’s housing affordability crisis may have been planted in 2009 by the former Rudd Government’s decision to allow temporary migrants to purchase established housing. Hard to believe, but true! This permission has led to a surge in demand, particularly from international students, many of whom hail from China. Students, of course, usually don’t have millions of dollars to buy property, but their uncles and aunties do, and so they buy these properties using their money.
According to news.com.au, buyers agent David Morrell, director of Morrell and Koren, described the foreign buyer situation to news.com.au as “nuts” adding “we are seeing jumps of $2-3 million dollars on properties”.
The source of the Chinese money, however, raises many additional concerns.
Australia has some of the laxest anti-money laundering (AML) laws in the developed world, making our housing market the ideal channel for laundering dirty money. Would you believe that despite determined calls from international bodies like the Financial Action Taskforce (FATF) for Australia to implement AML regulations, the beneficiaries of China’s laundered largesse – the accountants, lawyers, and real estate agents – have resisted these measures by lobbying the government to do nothing.
As reported in news.com.au, this despite the fact the global AML regulator, the Paris-based Financial Action Taskforce (FATF), issued a warning in 2015, and again during the COVID pandemic, that large sums of money were being laundered through Australian residential housing, mostly from China.
Further reinforcing the need to change the laws, our own Australian Transaction Reports and Analysis Centre (Austrac) warned the government that “laundering of illicit funds through real estate is an established money laundering method in Australia”.
Finally, Australia still maintains a ‘golden ticket’ visa program (Significant Investor Visa – SIV) – an established money laundering facilitation program, and with Chinese citizens making up 90 per cent of successful applicants. Operating since 2012, and with zero rejections, this program was introduced by former Labor Treasurer Chris Bowen in 2012. It is the legitimised version of a casino high-roller offer, and now that casinos have been reined in, those high-rollers are turning their attention to real estate in ever greater numbers.
According to news.com.au, these ‘golden ticket’ visas grant automatic permanent residency in Australia, and unlike other visa classes, no English language proficiency is necessary.
Australia’s ‘golden ticket’ visa program has allowed Chinese citizens to gain permanent residency in Australia with minimal oversight. This visa program, coupled with weak AML regulations, has reportedly facilitated the entry of corrupt officials and the laundering of illicit funds into Australia.
Indeed, last month, according to the ABC, “the former commissioner of Victoria Police, Christine Nixon, found the Home Affairs visa system was being exploited by “criminal syndicates … involved in various serious criminal offending and activities for profit.”
Elsewhere in the world, foreigners are finding it harder to buy a visa with ill-gotten wealth. Britain ended its program last year, and both Portugal and Ireland ended their “golden visa” programs in February this year. I note the prime minister of Portugal cited housing affordability issues in the country’s decision to end its golden visa program.
To address identical issues here, Australia must implement some basic security, including and especially Tranche 2 AML laws, subjecting the real estate gatekeepers to regulatory scrutiny. The ‘golden ticket’ visa program must be abolished, and temporary migrants should be restricted from purchasing established Australian homes.
Then, work should begin to investigate the source of funds for the property purchases made to date, with fines, confiscation and deportation to follow.
Much as both governments are at pains to send a signal to smugglers of the poor and destitute that Australia’s borders are closed to their activities, both sides of parliament should send the same signal to wealthy but corrupt and criminal foreign investors – that our borders and our property market are closed to them.
Failure to take these steps perpetuates the trend of foreign buyers pricing out locals and the Australian housing market serving as a haven for money laundering and a bolt-hole for criminals. It is crucial for the Australian government to act decisively to close these loopholes now.