Australia Property

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Foreign Investment Review Board chief attacks misinformation about foreign buyers

Jared Owens
FOREIGN Investment Review Board chairman Brian Wilson has criticised racially-charged commentary about Asian buyers in the housing market, noting there is little concern about Greeks or Italians buying houses.

The House of Representatives economics committee has launched an inquiry into foreign investment in residential real estate, amid anecdotal claims that interest by wealthy overseas buyers is driving up housing prices for Australian residents.

Mr Wilson today told the inquiry that public commentary about Asian buyers was not “necessarily malevolent” but reflected “either lack of knowledge or inadvertent misrepresentation of the facts”.

“I think it’s fair to say almost all the public commentary around residential real estate buying by foreigners has an Asian component to it,” Mr Wilson said.

“Very often where we might get a call that says ‘a Chinese has bought this house and my daughter wasn’t able to do so’ and it’s investigated (we find) yes, they’re of Chinese background but they’re a citizen — they live here,” Mr Wilson said.

Mr Wilson noted one-tenth of Australian permanent residents now have Asian ethnicity, with the proportion even higher in cities.

“We don’t often have concerns about people of Greek extraction buying properties and people of Italian extraction buying properties because they’re not so easily identifiable, I suppose, at auctions.”

Mr Wilson noted residential real estate was Australia’s largest asset pool at around $5.4 trillion, equivalent to three times the superannuation system and almost four times the Australian stock market.

However, only about 20,000 residential property transactions involve legal temporary residents, from a pool of between 500,000 and 600,000 each year.

The inquiry has been told that foreign investment often underpins investment in large-scale housing developments, boosting supply.

A randomised survey of 74,000 established home sales in Sydney by the Finance Discipline Group at the University of Technology, Sydney, revealed buyers with Chinese surnames on average spent about 2 per cent — or $13,800 — less on their homes between 2000 and 2011, the inquiry has heard.

SALES: Chinese drive hardest bargain

Treasury officials, when asked about the impact of foreign buyers, said low interest rates, availability of vacant land and state government incentives were “likely to be having a much larger impact on house prices”.
Australian house prices fall 1.9pc in May

AUSTRALIAN dwelling values have recorded their first month-on-month fall since May 2013, dropping 1.9 per cent last month, according to RP Data-Rismark figures.

The fall represents the biggest single-month decline in house prices in more than five years, according to CommSec chief economist Craig James.

“Home prices couldn’t lift forever — at some point there had to be a correction and it seems the federal budget caused people to pause and take stock,” Mr James said.

However he added, auction clearance rates were still healthy over the weekend, “so the drop in home prices may just be the pause that refreshes”.

Most capital cities registered a decline for the month, with Melbourne performing worst with a 3.6 per cent reduction in values, while Sydney gave up 1.1 per cent and Brisbane lost 1.7 per cent.

For the past three months, however, capital city dwelling valuations are up 0.7 per cent, the lowest rate of appreciation since the June quarter 2013.

The best performing for the quarter was Darwin, with a 5.5 per cent increase, while Melbourne lost 1.9 per cent.

Australia’s most expensive city is Sydney with a median house price of $678,500, while Hobart is the most affordable, with a median dwelling price of $345,000.

RP Data research director Tim Lawless said this month’s poor performance can be attributed to both “seasonality and more moderate housing market conditions”.

Mr Lawless said the housing market was at its peak, and suggested lower consumer confidence might have hit house prices.

“There is a very strong correlation between levels of consumer confidence and housing market activity. If we see sentiment levels remaining low it is likely that housing market activity will be more sedate,” Mr Lawless said.

The boom in apartment developments in Melbourne has forced rental yields down to 4.4 per cent, with Sydney fairing second worse with rental yields on units of 4.7 per cent.

The low yields did little to deter buyers in Sydney on the weekend, with Leighton Properties’ Aqua development in Bondi Junction in the city’s eastern suburbs, selling all 129 apartments on the first day of sales, bring in $130 million. Another development, in northern Lindfield, sold 69 apartments, 75 per cent of units on offer.

Mr Lawless said high-value homes had faired worst.

“The most expensive quarter of capital city dwellings have seen their values fall by 0.5 per cent while the most affordable end of the market has seen a 2.8 per cent rise in dwelling values over the same period.”

“This shift in the performance across price segments, where more affordable housing has shown a stronger capital gain, was apparent last month also.”

In other data today, approvals for the construction of new homes fell 5.6 per cent across Australia in April, official figures show.

Local councils approved the construction of 14,931 new homes, including houses, townhouses and apartments in multi-unit buildings, in April.

Over the 12 months to April, building approvals were up 1.1 per cent, the Australian Bureau of Statistics said.

Economists had forecast a rise of 2 per cent in approvals for April.

Approvals for private sector houses fell 0.3 per cent in the month, and the “other dwellings” category, which includes apartment blocks and townhouses, was down 14 per cent.

The Australian dollar, meanwhile, has fallen below US93c after the release of weaker than expected housing construction data.

With AAP
Apartments slump as building approvals drop for third month

Michael Bleby
501 words
3 Jun 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.

Building approvals fell for a third straight month in April in seasonally adjusted terms, as approvals of high-rise apartments slumped in NSW and Queensland.

The national 14 per cent decline in private apartment approvals coincided with a 0.3 per cent decline in approvals of privately owned new standalone dwellings, the Australian Bureau of ­Statistics said on Monday.

Overall approvals fell 5.6 per cent to 14931 dwellings, down from a revised figure of 15812 in March .

The house-building industry put a brave face on the figures.

"The monthly volume of building approvals in April 2014, continued to recede from the decade high achieved back in January, although with close to 15,000 dwellings approved in the month it is still a very positive result," said Housing Industry Association economist ­Geordan Murray.

One bit of good news came from detached houses. The seasonally adjusted total of 9387detached houses approved in April – while ­little changed from the month before – was a 16.1 per cent increase on the 8086 standalone dwellings approved a year earlier.

The overall figures marked a 1.1 per cent rise on the 14765 approved a year ago. April's 5545 apartment approvals marked a 16.9 per cent drop from the same month a year ago, when 6679 were approved.

The biggest declines came in NSW, where dwelling approvals fell a seasonally adjusted 22.8 per cent after a 6.5 per cent rise in March.

In non-adjusted terms, the number of approvals for apartments in blocks of four storeys or greater more than halved to 958 in April from 2206 in March – well below the per-month average of 1694 approvals the state has clocked up over the past 12 months.

Approvals of standalone houses in NSW slipped 12 per cent to 1651.

Queensland, which suffered a 20.3 per cent overall fall in dwelling approvals – its third straight month of decline – also suffered a slump in apartment approvals as the number of high-rise dwellings fell by almost three-quarters, to 145 from 539 in March.

It was Queensland's lowest number since February last year, when just 135 high-rise apartments were approved. The average monthly approval figure over the past year has been 649.

In Victoria, approvals rose 14.9 per cent after a 12.9 per cent dip in March. Approvals of apartment buildings of four storeys or more also surged, nearly doubling to 1321 from 710 in March, in non-adjusted terms. Apartment approvals in Victoria have averaged 1047 a month for the past 12 months.

Approvals of standalone houses were little changed at 2541.

Approvals also returned to positive territory in WA, up 4.4 per cent after a 9.2 per cent decline, and marked a second month of increase in SA. In original, non-seasonally adjusted terms, approvals rose 8.2 per cent in NT and sank 28.8 per cent in ACT.

Fairfax Media Management Pty Limited

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Off-the-plan sales to be simplified in a boon for developers

Off-the-plan sales to be simplified
Queensland Attorney-General Jarrod Bleijie this week introduced amendments to property laws aimed at cutting burdensome bur­eaucracy. Source: Supplied
DEVELOPERS in Queensland will soon be able to collect deposits of up to 20 per cent for off-the-plan sales — assisting finance in major projects — without triggering instalment contract obligations.

Queensland Attorney-General Jarrod Bleijie this week introduced amendments to property laws aimed at cutting burdensome bur­eaucracy, welcomed as a “substantial benefit” for developers.

It includes changes to the state’s Property Law Act to raise the ceiling of deposits for off-the-plan sales from a maximum of 10 per cent to 20 per cent without buyers being afforded extra rights under an instalment contract.

Allens partner Tony Davies, a member of the Land Sales Act review committee advising the state government, said the bundle of legislative changes would simplify procedures and provide more openness for buyers.

“It will be a great boon for the industry and the financiers are very keen to see that,” Mr Davies told The Australian.

Changes introduced in the Queensland parliament also seek to consolidate all legal provisions relating to the sale of strata lots into one bill, instead of the sometimes contradictory provisions under previous laws. Under the changes, developers will have to allow access to documents detailing the size, location and floor level of the apartment, as well as earth works, retaining walls and other structures.

Mr Bleijie said the changes would allow greater transparency and stronger protections for home buyers “taking a leap of faith on off-the-plan land, units or apartments”. “We have a strong plan for a brighter future and an important part of that future is growing our construction industry,” he said.

“After extensive consultation with the property industry, administrative processes will be streamlined to avoid the need for complicated forms and duplicated disclosure obligations will be removed,” he added.

The bills are expected to take months to pass through parliament, possibly after going to a committee for further oversight.

Meanwhile, the apartment boom in Sydney is expected to last for another two years, unlike in Melbourne where prices are starting to drop.

Forecaster BIS Shrapnel said the strength in Sydney’s high-density market is forecast to remain until 2016, underpinned by low vacancy rates, low interest rates, relatively attractive yields and a strong residential market creating the expectation of capital gain.

Foreign capital on the hunt for local developers

Property observed Robert Harley
515 words
5 Jun 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.

The bid – seemingly a knockout one – by Frasers Centrepoint and its billionaire Thai owner for Australand Property Group underscores a key point about Australian real estate.

In equities, the flow of money out of Australia might be greater than that coming in. But in property, the wave of money washing into the country dwarfs that being invested offshore.

Security, transparency, the quality of life and the relatively high yields available in Australia have long attracted offshore investment. By comparison, the shift offshore has often ended in tears, most recently in the unbridled exit before the global financial crisis.

The surprise move by Frasers Centrepoint points to a new shift in the latest wave of foreign buying: instead of purchasing individual sites or buildings, the target may now become Australian companies. Meriton Apartments boss Harry Triguboff has already raised the "For sale" flag, as long as the money is right.

Smaller listed developers such as Devine, which just issued an upgrade but has a parent in Leighton Holdings that is streamlining its operations, would have taken note.

In commercial property, $US2.7 billion ($2.9 billion) worth of Australian capital went offshore last year. By comparison, $US11.2 billion came surging in, according to CBRE.

A number of key institutional investors, such as the Future Fund and Australian Super, are quietly looking offshore as the returns on Australian commercial property weaken. But they are moving against the trend.

In the housing sector, the Foreign Investment Review Board approved $17.2 billion worth of applications to buy residential property in 2012-13. The outflow, to buy distressed United States housing or second homes in Bali or Paris, would be minimal. The most recent surge of offshore buying has come from apartment developers.

Offshore developers, both listed companies and wealthy individuals now control a pipeline of about 35,000 apartments, roughly 15 per cent to 20 per cent of the national market, according to Kevin Stanley, a principal of economics consultancy Deep End Services. "They don't muck around. They are quite frustrated about buying sites and are going upstream to buy the companies," he said.

A number of Asian developers who made landmark purchases in Australia have also realised that the planning regime and the construction costing does not work as it does at home. At least one Asian developer is known to have offered a site, bought at what appeared to be a nosebleed price, back to the local developers.

JPMorgan noted that Frasers Centrepoint's move was the first instance – and in significant size – of an offshore real estate investment trust actively participating in a local merger or acquisition. "We've seen offshore developers be far more active in our market; we've seen offshore REITs, particularly from Singapore, buying direct properties; and of course, we've seen offshore pension funds wanting more Australian property exposure – either direct or through wholesale funds," the broker noted.

"With Australian property yields still looking relatively attractive, can we expect more?"

Fairfax Media Management Pty Limited

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Sydney CBD office vacancies to peak later, last longer

Michael Bleby
242 words
4 Jun 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.

Sydney's CBD office market is in for a longer than expected slowdown.

Deutsche Bank analysts Ian Randall and Jason Weate have raised their ­forecast peak vacancy rate to 13 per cent in 2016, later and deeper than the 10.6 per cent peak previously forecast for 2015.

The revised prediction, down from the current 10.5 per cent, reflects the 101,000-square-metre growth in supply from the Barangaroo T1 office tower's completion in the second half of 2016 – compared with the ­previous forecast date of late 2017 – along with data from JLL's March ­quarterly report on the national office market and ­Deutsche Bank's reduced forecast for net absorption of office space.

"Calendar 2015 and calendar 2016 will see a sizeable increase in supply, which is normally accompanied by increased take-up as tenants take on expansion space in new premises," Mr Randall and Mr Weate say in a research note.

"However, this supply cycle differs from previous ones in that tenants that have pre-committed to new developments to be delivered by December 2016 are, in aggregate, taking 25,000 square metres – or 11 per cent – less space than they currently occupy."

Deutsche Bank left unchanged the 12-month price target of GPT Group, Mirvac Group and Dexus Property Group, but lowered its target for Investa Office Fund to $3.18 from $3.20.

Fairfax Media Management Pty Limited

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Units surge ahead as houses stall


Lisa Allen

Property & Tourism Reporter
Play video
$30 million home in Stepford Wives suburb.

Liberte Display SuitesPaul Barratt, centre, shows the plans for Liberte to prospective buyers Damien van Houts and Soraya Hosseini. Picture: Jack Tran Source: News Corp Australia <>
Properties of the weekend with Prue Mill...Liberte Display Suites
NATIONAL residential prices plummeted 1.8 per cent in capital cities last month, but apartments in inner cities and coastal locations are expected to perform strongly until 2016.

In parts of Sydney, Melbourne, Perth and the NSW north coast, apartment values grew by as much as 46 per cent in the 12 months to February, the best returns in seven years, ­according to RP Data research prepared exclusively for The Weekend Australian.

Economists warn growth is unsustainable at that level in coastal markets such as Cairns, Gold Coast, the Sunshine Coast and the Tweed coast in NSW.

RP Data’s head of research, Tim Lawless, cited two reasons for apartment growth in coastal regions. “There’s a return to tourism-based accommodation as well as a return of sea-change ­migration which is very much related to the performance of the sharemarket,” Mr Lawless said.

But it’s not just coastal apartment owners cashing in. BIS Shrapnel forecasts inner Sydney’s off-the-plan apartment sales will be strong for the next two years, underpinned by low ­vacancies, low interest rates, ­attractive yields and a strong metropolitan residential market.

The economic forecaster says $45 billion was borrowed in the 12 months to March to purchase residential property in NSW alone — 76 per cent more than the 2010-11 total.

Apartment approvals in Sydney more than doubled from 9932 dwellings in 2010-11 to 20,354 dwellings in the year to March.

BIS Shrapnel manager Angie Zigomanis said Sydney unit prices had risen by 18 per cent over the past two years.

AMP Capital chief economist Shane Oliver said 46 per cent was “certainly unsustainable”.

“Last year was quite strong for apartments, although there was a huge range within particular markets, with some areas coming into favour after a soft patch,” Dr Oliver said.

“This year a few areas will do very well, but we’re in the process of a slowdown. There will be gains in the realm of 5 to 10 per cent overall, with Melbourne and Sydney, which did well last year, toward the lower part of that range, while other states which lagged having the potential to end in the higher end.”

In Melbourne, apartments in suburbs such as Murrumbeena jumped 46.7 per cent, according to RP Data. East Melbourne rose 25.6 per cent and Toorak grew 23.3 per cent.

In the west, the Perth suburbs of Burswood fared well with apartment values growing more than 46 per cent in the 12 months to February.

Paul Barratt, Brisbane-based director of CBRE Residential, said buyers wanted to be close to retail and good transport links.

Mr Barratt, who is marketing Liberte, a 112-apartment project at Brisbane’s Kangaroo Point, said he was beginning to see speculative plays return.

Soraya Hosseini and her partner want to use “the little savings we have” to start investing in the property market.

“(Off the plan) is better value because we wanted something brand new, which we couldn’t ­afford, or wanted to buy a land and house package and renovate, which is also too much,” Ms Hosseini said.
Foreign buyers not behind house rises


HOUSE prices have surged ahead over the past 12 months, growing at a cracking double-digit pace.

Very low interest rates have been a fundamental driver of higher prices, and have allowed pent-up demand to be unleashed. This is coming from a combination of the population expanding at a quick pace and a growing shortage of dwellings. The shortage is most acute in NSW, where house prices are rising the most.

The momentum in the residential market is being led by investors and upgraders. First-home buyers are sticking to the sidelines in most states and territories.

A recent biannual survey published by the Australian Property Institute revealed some interesting results.

The survey showed that respondents thought house prices were largely being driven by foreign investment; indeed, 88 per cent thought foreign investment was significant or very significant in driving Sydney prices up, 72 per cent thought that was the case for Melbourne prices and 62 per cent felt the same about Brisbane prices.

Only half the respondents cited low interest rates as a factor behind rising prices.

The survey participants are industry professionals and include valuers and agents.

Foreign investment is certainly a contributing factor to higher housing prices, but it would be hard to argue successfully that it is the sole reason behind their strength.

First, foreigners are constrained by Foreign Investment Review Board limits. Perhaps more importantly, foreigners mostly can only buy new housing.

Australia’s stock of housing is dominated by existing housing, not new housing. The most recent update on housing finance is for March. That month, loans to buy new property made up 5 per cent of all loans financed, compared with more than 80 per cent for existing property. Of that 5 per cent, not all would be foreigners.

House price growth should continue but at a more moderate rate. Residential construction has started to lift and will gain greater momentum as we move through this year and next.

But the dwelling shortage is unlikely to disappear in a hurry because of the pace at which the population is growing.

Interest rates too are likely to stay low for an extended time. We are expecting the next move to the cash rate from the Reserve Bank to be up, possibly as soon as late this year.

Foreign investment flows are not likely to dry up either. But perception and reality are two different things.

Besa Deda is chief economist with St George Bank.
Real estate boom by foreign buyers escapes the regulators’ net

Luxury Property for Foreign Investment Story
Prestige real estate agent Mark Manners. Picture: John Feder Source: News Corp Australia
AUTHORITIES have failed to prosecute any foreign buyer for breaching rules aimed at preventing investment in established homes in Australia, despite a surge of purchases by foreigners including wealthy Chinese.

Amid a growing debate about housing affordability, it has emerged there has not been a single prosecution since guidelines were changed in 2010 to contain foreign investors to off-the-plan developments.

The rules were introduced to prevent foreign investment driving up the price of Australian ­property.

Evidence indicates wealthy foreigners are using lawyers and ­relatives to sidestep the regulations. The revelations come as China-based financial experts point to a looming wave of ­Chinese investment in Australian property that may contribute to price rises already seen as entering bubble territory, as Beijing loosens controls on the amount citizens can hold in foreign currency.

A Chinese buyer last weekend clinched the $5 million purchase of one of Adelaide’s top stately homes, The Myrtles, although how they obtained Foreign Investment Review Board approval ­remains unclear.

Industry professionals have told the House of Representatives economics committee that foreign investors — in the unlikely event that they were prosecuted — viewed the $85,000 fine as the “cost of doing of business”. Foreign investment laws also allow for forcing foreign investors that breach the law to sell off their ­illegally acquired houses, but it is not clear whether this power has been used extensively or not.

“There have been no prosecutions since 2010 under the up­graded scheme, whereas prior to this there were, on average, one or two a year,’’ the Real Estate Institute of Australia said in a submission to the committee’s inquiry into foreign investment in Aus­tralian property.

The REIA has called for a major rejig of the compliance ­regime for established homes, arguing that the $85,000 fine should be replaced with a penalty of 10 per cent of the property’s value.

Australia’s foreign investment laws make it one of the few countries in the world to prohibit foreign investment in established homes. Despite this prohibition, the latest figures from the FIRB show that foreign investors have doubled their purchases of Aus­tralian established property in just one year. They bought almost 5100 established homes last financial year worth $5.4 billion.

This wave of buying has come even though the only circumstances in which a foreign individual can purchase a fixed home is if they are studying here or they plan to demolish it to build two or more units.

Mark Manners, of prestige Sydney property agency Simeon Manners, said his firm recently sold a Mosman property for $15.6m to a European family and was marketing another, a nearby harbourside mansion, to foreign and local buyers. He said foreign investors bought at the top end of the market and did not affect affordability at lower rungs.

Eric Hartanto, the franchisee of Harcourts Applecross in Perth said Chinese and foreign buyers were switching to Perth luxury property as local buyers faded from the scene amid the wind-down of the mining boom.

He said Harcourts had a database of 1.3 million wealthy Chinese buyers that it used to promote its luxury offerings.

“I think Chinese are keen to purchase in this area,” he said. “They can see value for money, lifestyle and education advantages.”

Reserve Bank governor Glenn Stevens has described the surge in Asian investment in Australian property as akin to Russian oligarchs buying up London.

He said it was affecting prices.

The committee has heard that foreign investors sidestep the restrictions on fixed homes by using their offspring studying in Australian to obtain approval under the temporary resident clause, or via relatives who have become permanent residents.

In evidence before the committee earlier this month, FIRB officials said they vetted applications to invest in fixed homes and scanned rental lists to see if see if the property was being let in contravention of the laws stating it is to be used to accommodate the applicant.

The Australian has been told often wealthy investors are happy to let the property sit vacant to avoid triggering FIRB review. Another loophole appears to be in following up on whether homes bought by students or relatives of wealthy foreigners were sold within three months of the individual leaving Australia as required.

John Hill, the Treasury official in charge of compliance for real estate purchases, told the committee “there is no easy, convenient data that will automatically tell us when an individual has departed Australia and rented”.

Mr Hill said his division was examining up to 40 such cases at any one time and received thousands of calls about infringements, but said “it is very rare that we will exercise prosecution activity”.
^^^is RBA saying 2 different things in 2 different context?

"As foreign investors' share of the market has remained fairly steady over the past two decades, the Reserve concluded overseas buyers were not the main reason for price rises over the period."

(30-05-2014, 11:45 AM)specuvestor Wrote: Property is a herd instinct market. Not too sure why it isn't obvious that 5-10% transaction can affect the pricing of the other 90%, including property stock (existing inventory not stock market).

We are witnessing the reverse from Singapore to HK to China with even lower transaction volumes.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)

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