Up to $1 billion in dodgy money from China appears to have poured into the property market in Australia over the past financial year, raising fresh concerns about the scale of illegal purchases of Australian property by Chinese foreign buyers.
As reported in The Australian, data contained in the 2015/16 annual report of the Australian Transaction Reports and Analysis Centre (AUSTRAC) shows that in total, $3.3 billion worth of transactions were reported to the organisation in that year – around $1 billon of which has gone into foreign property transactions.
The data comes amid growing concerns about the level of foreign investment in Australian property markets, particularly in the residential sector amid fears that competition from foreigners is driving up local house prices.
Official data from the Foreign Investment Review Board suggests that the dollar value of foreign investment in all forms of real-estate grew five-fold from less than $20 million in 2009/10 to $96.09 million in 2014/15.
Of this, around $60.77 billion went into residential real-estate (up threefold in five years) including $49.250 billion in new or newly constructed homes and $11,500 billion went into the purchase of existing dwellings.
Under laws designed to channel foreign residential real estate investment toward new construction, non-Australian citizens are banned from purchasing established dwellings in Australia unless they intend to live in them as their residence whist staying in Australia.
At a macro level, there is little evidence that foreign buyers are having any material impact in terms of pricing out of established housing.
Even if you assume that widespread flouting of foreign investment rules exists and that in fact the $11.5 billion worth of foreign investment in established dwellings which is reported to the FIRB represents only half of all foreign purchases of established dwellings, the $23 billion worth of foreign investment activity which went into established dwellings during 2014/15 would not have a huge impact when compared with the $211 billion which domestic residents borrowed to finance established house purchases for owner occupier purposes or the $125 billion worth which was lent to investors for purchase of established housing in the same year.
Nevertheless, the figures suggest that illegal activity with regard to house finance purchases could be more prevalent than previously thought.
In the first half of last year, financiers pulled back in terms of lending activity to foreign investors amid growing evidence of widespread fraudulent activity relating to loan documentation.
Following this, the federal government announced that foreign buyers of local residential property would be hit with fees of at least $5,000 when applying to invest in property in order to fund beefed up efforts regarding enforcement of foreign investment rules.
A number of state governments as well have themselves imposed additional levies on foreign purchasers of domestic residential property.