China Daily Global Edition (USA)
Chinese money— not a big, bad wolf
Australia’s politicians, economists and analysts agree foreign investment, including from China, in real estate is key to economic growth
Sydney— Foreign investment in real estate has long been a politically and financially contentious issue in Australia — despite bipartisan political support for foreign investment from both sides of the party divide to allow overseas investment in property.
Analysts say that in the face of popularly widespread doubts to the contrary, it plays a positive dynamic role and is key to the workings of the local real estate market and the wider economy.
But they add that erroneous misconceptions remain as to the actual impact that foreign — and in particular Chinese investment — has Down Under.
Despite substantive evidence to the contrary, such as the findings of an Australian Treasury report issued late last year, a stubborn perception persists among many Australians — with many keen to point the finger atChinese and other foreign nationals for the explosive price growth in recent years in the major Sydney and Melbourne housing markets.
While the blame game over price rises has taken place, at the same time Chinese nationals have been courted by Australian policymakers as a way to boost Australia’s housing stock — with the same Treasury department report clearly stressing “foreign investment is being channelled into increasing the property supply as intended,” with Chinese demand singled out as being critical.
One analyst said that with the positives of foreign investment on clear display, it was of paramount importance that the public was better educated as to not only the benefits of wide scale foreign investment in the real estate sector, but also the other factors at play that were causing Australia’s current housing supply and affordability crisis.
David Rodgers, senior lecturer in architecture, design and planning at theUniversity of Sydney, toldXinhua that the impact of Chinese investment on real estate was minimal and too much emphasis was being placed on looking for “easy answers to complex problems” in the real estate market.
“I think an easy answer people have come up with about the housing affordability problem is to say, well, it’s all the Chinese capital,” Rodgers said.
“The housing affordability problem is a very complex problem and theways that you might address it can be quite confronting to people,” he added.
Reports in The Australian newspaper on Jan 30 suggested that billions of dollars in “dodgy” Chinese investment money was making its way to Australian shores — and reported that government agency Austrac investigated A$1 billion ($769 million) of “suspicious” transactions involving real estate investments from China.
The story drove a narrative about a perceived threat to Australian housing affordability from China, yet admitted: “These so-called ‘suspicious matter reports’ are not definitive evidence of wrongdoing, but rather indications wrongdoing may have occurred.”
Analysts say stories such as these added fuel to the fears regarding foreign investment that were held by the public. But the incidents comprised a small amount of the value of total real estate, in either new dwellings, which foreign investors can actually buy, or established dwellings, which they are barred from investing in.
Foreign direct investment in Australia is never going to be infallible, analysts pointed out. They said there will always be instances where regulatory Australian Prime Minister guidelines are not correctly followed, or instances where the Foreign Investment Review Board is required to step in with a determination that approval for an investment or purchase should be denied.
The Australian head of one of the biggest real estate websites in China said that over 2,000 investigations had been done into real estate investments, with a finding of wrongdoing in a mere 61 sales, said Juwai.com’s GavinNorris.
He said that small figure, when seen against the total investment of foreign capital in Australia’s real estate, was an even more insignificant number.
“It’s a quite minuscule problem, I think.”
The deputy director of the Australia China Relations Institute told Xinhua that not enough stories were being shared about the benefits of foreign investment, with Chinese companies such as Greenland and Dalian Wanda building new residential developments across the country and employing Australians.
“These companies employ thousands of Australian workers David Rodgers, putting up these apartments. These aren’t Chinese workers putting up these apartments. They have jobs that they wouldn’t have had without this kind of investment,” James Laurenceson said.
“And think of all the Australian families who now have a place to live, because these apartments were built thanks to foreign investment.”
The reality of foreign investment in the real estate market in Australia is that the injected capital serves to allay the legislative and economic conditions that have caused the housing affordability crisis in the first place.
Laurenceson said that factors behind the crisis include increased investment in the market by superannuation or pension funds and real estate trusts, which at the domestic level allowed for easy access to plentiful financing.
“In Australia we have record low interest rates, so now property speculators can borrow even more than ever before,” he said.
“That’s the really big change over the last fewyears.”
Professor Hans Hendrischke, from the University of Sydney Business School, told Xinhua that although the part that interest rates played in housing affordability was significant, the government had to do more to rectify the core issues of supply and affordability which would rightly shift the discussion away investment.
“What the government is doing is regulating and providing barriers to local and foreign investors to prevent overheating of the market,” Hendrischke said.
“The government is trying to be seen as doing something to increase affordability, but I don’t think minor measures on the fringe do much to the overall economic elements that drive the real estate market.”
Foreign direct investment can never be eradicated in Australia, because it is crucial for the growth of the country as a whole. But Rodgers suggested that some measures could be introduced in order to shape the social impact of investments coming in from overseas.
“What we need is a very nuanced discussion about who these foreign investors are and what they are doing with their capital,” he said.
“It might be that we need a taxation regime put on foreign capital, that is then put into a fund for affordable housing, but that will reduce the appeal of Australian property to foreign investors,” he said.
“It’s a complex situation and how you get that capital to produce good social outcomes is a challenge.”
In the meantime, analysts say the reality is that foreign investment in real estate, particularly from China, appears not to be the big, bad wolf as some Australian people have come to believe. Figures, analysts say, clearly support that fact.
Rather, the consensus of politicians, economists and analysts is that foreign investmentin real estate is needed to not only achieve economic growth and increase housing supply, but establish a partnership with China and Asia for a more fluid global marketplace.
With the world and Australia heading in a globalized direction, Rodgers said he looked forward to a time where the lines between “local” and “foreign” were blurred.
“Australians going to Asia, people from Beijing coming to Sydney, people in Australia going to work in Singapore, this mobility will challenge our ideas about what it is to be local and foreign,” Rodgers said.
“In the future, I don’t think current analyses are fully going to capture the complexity of where the globalization of real estate is going.” from foreign
Malcolm Turnbull (left) shakes hands with Gui Guojie, general manager of Shanghai CRED Real Estate Stock, after signing a Memorandum of Understanding at a hotel in Shanghai on April 14, 2016. I think an easy answer people have come up with about the housing affordability problem is to say, well, it’s all the Chinese capital.”
senior lecturer in architecture, design and planning at the University of Sydney