Australia Cracks Down On Foreign Real Estate Buyers As "Ghost Towers" Increasingly Outrage Locals

Tyler Durden's picture

As we've discussed frequently over the past several years, home prices in some of Australia's largest markets have gone completely vertical since 2013 as wealthy Chinese buyers have increasingly sought safe havens outside of the mainland to launder invest their cash.  Per the chart below, home prices in Melbourne have more than tripled since 2002 and Sydney is almost as bad.

Not surprisingly, the bubbly home prices have angered locals, not only because they've been priced out of the market by foreign buyers, but more so because those foreign buyers scoop up prime real estate and then proceed to let it sit vacant.  The problem is so pervasive that these luxury towers, with apartments approaching $1 million, have been dubbed "ghost towers" by locals.  Per Bloomberg:

These "ghost towers," as the high-end residential property with three-bedroom apartments costing almost $1 million have been dubbed, are popular with Chinese investors who mostly live abroad. Their darkened blocks loom as sparsely occupied symbols of a property market where even solidly middle class households have increasingly found themselves priced out.

 

Now, policy makers are seizing on public resentment and hitting foreign buyers with more taxes. New South Wales has doubled its surcharge when foreigners purchase residential property, and Western Australia has added a new tax as well. More controversially, both the conservative federal government and the left-leaning one in Victoria state that includes Melbourne this year imposed additional taxes on properties deemed to be empty for six months or more.

 

More than 60 percent of Sydney residents blame foreign investment for the rising prices, according to a survey by University of Sydney academic Dallas Rogers. The idea of taking prime real estate out of the housing supply and leaving it vacant has become a focus of anger as homelessness has risen and hundreds of people have been camping in the rough out outside places like the Reserve Bank of Australia.

 

“It’s just absurd," said Tony Keenan, chief executive officer of affordability advocacy group Launch Housing, referring to the fact that Australia’s long period of uninterrupted growth should have ensured homes for everyone instead of "record levels of homeless and massive construction with empty properties at the end."

 

An analysis of Australian census data by the City Futures Research Centre found more than one in 10 homes unoccupied on the night of the count last year, with empty properties having risen 19 percent in Melbourne and 15 percent in Sydney since the last census five years previously.

 

Foreigners, mainly from China, purchased 25 percent and 16 percent of the new housing supply in New South Wales and Victoria, respectively, in the year through September 2016, according to a Credit Suisse Group AG examination of state tax receipts.

But, much like Vancouver where city officials slapped foreign nationals with a 15% transfer tax on home purchases last summer, the city of Melbourne has decided to fight back by imposing its own taxes to curb what increasingly looks like one of the world's largest housing bubbles.

Melbourne’s tax of 1 percent of an empty home’s value takes effect in January, adding to a nationwide tax imposed in May that starts at A$5,500 ($4,400) and scales sharply upward for properties worth more than A$1 million.

 

Figuring out if a home is vacant is a vexing subject for public officials. Those in Victoria have said they plan to ask owners to self-declare, and also intend to monitor electricity and water usage to find cheaters. The Australian Taxation Office suggests the government investigate tips from informants. Other potential sources could include postal data or tax returns, said Catherine Cashmore, president of land tax reform group Prosper.

 

But real estate professionals say it’s easy enough to hire someone to come in and turn on switches and taps, making a place appear lived-in. Agents say many properties are only temporarily empty, waiting for children to attend university or a family to able to move in. They also raise questions of fairness.

Of course, not everyone is happy with the new taxes, including Monika Tu who has undoubtedly made a fortune helping rich Chinese buyers launder money through the Australian real estate market.

“What next?" said Monika Tu, the Sydney-based director of Black Diamondz, which specializes in high end property sales to mainly Chinese buyers. "Shall we tax people who buy new shoes and don’t wear them?’’

Sorry, Monika...you can always move to Seattle...we hear they're still very receptive to helping launder Chinese cash...

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ThirdWorldNut's picture

Writer needs to visit Londonistan. Street after streets are empty throughout the year except during 2 months of British summer.

Atleast Australia only has Chinese, London has got Sheikhs and Chinese both gnawing at it. Most builders have stopped building model apartments, Chinese buy just by looking at computer rendered show homes. Then they dont even care to rent it out. Effectively taking out properties from buying as well as renting market, pushing rents and prices both up. Stuffed in both the holes!

Welcome to the brave new globalized world.

 

Stuck on Zero's picture

Thanks to globalism the middle class is getting wiped out globally.

Laowei Gweilo's picture

"ghost towers" by locals [citation needed]

 

They say the same thing about Vancouver and yet every time I visit there for business and come over the Cambie bridge, all of False Creek and Yaletown is lit up like a starlit sky.

Bay of Pigs's picture

Try looking at the condo towers going out of downtown near Stanley Park. Plenty of empty buildings at night. Very few actual residents.

7thGenMO's picture

I guess the ChiComms figured out that if The Fed was going to conjure up trillions that they would have to use a roughly x6.5 multiplier to maintain the dollar-yuan link.  Of course, to keep this new cash from the proletariat, these ChiComms decided to buy up the fringes of The Empire with their freshly conjured fiat.  Surely Geithner and HRC (both visited China before QE started) knew nothing about this scam. ///

Dubaibanker's picture

No one seems to have visited Dubai then, where over 75% of ALL real estate (estimated at USD 2.5 trillion over the last 15 years) is lying empty!

Billionaires and QE have destroyed what's left of this world economy since 2008.

I am glad billionaires are going bankrupt, however, their wealth is being distributed to banks, not to the needy who need it the most!

UselessEater's picture

Australia has problems with all the usual suspects, Melbourne is winning though:

Some 14.5 per cent of the people living in the CBD were born in Australia

http://cbdnews.com.au/the-cbd-is-one-enormous-chinatown/

 

edit for sp. typo.

Funn3r's picture

except during 2 months of British summer

Nostradamus predicted that one day we in the UK would have a 2-month summer. It hasn't happened yet but I want to believe. Our 4-day record summer this year was the nearest we have made it.

GETrDun's picture

Run a trade deficit with china and the excess currency they accumulate is used to purchase up your real estate. they are going to buy the prime stuff, not the shithole ghettos.

Simple laws of economics 101

Thank your government for living outside its means.

I'm in the US and Chinese are buying up shit all over the place.

Better learn Mandarin bitchez!

stinkhammer's picture

who you gunna call?

Yen Cross's picture

   There's still hope for Australia.

  Unfortunately the $aud is going to be back in the aud/usd  60's when it happens.

 

pitz's picture

I would expect the AUD$ to go to the moon as RE deflates. 

Yen Cross's picture

 Are you insane?

  Seek financial help ASAP!

HankPaulson's picture

Sorry, but there is no way Australia is going to "crack down on" foreign real estate buyers. The only way to keep the market inflated and rising is to increase foreign ownership. Use your brain!

McNoob's picture

What a bunch of wankers calling for higher property/land taxes etc.

Either you have property rights and defend it, or you don't.

People can buy it and rent it out or leave it empty.

If you don't want it empty don't sell to them in the first place.

Buy it yourselves and rent it out to the Aborigines.

I've sure they will be eternally thankful.

thefinn's picture

Victoria would make it 100% tax rate if they thought they could get away with it.

philipat's picture

Yes, agreed. Property rights don't necessarily have to apply to foreigners; especially where money laundering is the prime purpose. The Australian Government is going OTT in its pursuit of domestic taxes, including moving towards banning cash "because cash is used by criminals and terrorists" of course, but when it comes to Billiona of illicit cash coming in from China...crickets. Hypocrisy in the most extreme. 

I live in Indonesia where foreigners are not allowed to buy freehold or even long Leasehold (100 years+) properties, a right which is reserved only for Indonesians. And when looking at the property "markets" in Australia, London, Seattle etc. where local people have been entirely priced out of the market by foreigners, one has to agree that such a policy makes perfect sense.

If Governments genuinely wanted to address this issue, it isn't rocket science. The fact is, for a number of reasons mostly associated with their financialised economies, they don't.

Wile-E-Coyote's picture

You are so wrong on this, the investors distort the local market. Local people are locked out of property by rising prices and those rising prices are exasperated by the fact the demand for property is never quenched no matter how many properties are built, as the properties lie empty. It is a system that guarantees a return for the foreign buyers, it also effects the local economy as these empty dwellings add nothing to the cash flows of local businesses and services.

I have seen the same thing in London, high-end blocks of apartments all sold but empty, the readings on the electric & gas meters tell you everything you need to know. Though now in London things are changing the introduction of new stamp duty rates has halted the market and prices are now falling precipitously, £300k in a month (high end).

Benjamin123's picture

There is no local market. All countries are linked by trade and "locals" dont have a right to expect affordable housing wherever they want it.

For every London, Paris and Sydney theres a thousand no-name affordable cities. But no, everybody wants to live in the same elite cities and pull out their "local resident card" to thrash everyones property rights.

Wile-E-Coyote's picture

You are a fucking bundle of fun, aren't you?

Benjamin123's picture

Whos to say what even is a local?

I am sure the locals in expensive cities already own property and are happy with high prices. Renters are the ones being displaced, and renters are never truly local people. Random poor british people from outside london dont have a right to cheap housing in the most exclusive city of their country. Not everybody can live in the same place.

Next people will be asking for affordable social housing in Monaco.

Expendable Container's picture

Australia is a Fabian Socialist (communism by stealth) nation - not that they realize it yet - and communism means NO private property. They pay high 'rates', have 'overlays' restricting usage, and now introducing a 'tax' to ordinary Australians who have a cheapy holiday home away from the cities......the Chinese excuse is just that - a justification to remove by stealth private property. They also plan to sneak in, in the future, 'retrofitting' before you can sell a house, to 'save the planet' by making them more 'energy sustainable'. Its all B.S. Just call it bolshevism. Globalism=bolshevism, coming globally by any name except what it actually is.

fulliautomatix's picture

"this year imposed additional taxes on properties deemed to be empty for six months or more."

A study done back in 2013 that looked at water usage by property in Melbourne came to the interesting conclusion that 30k propertiies were not being lived in. No further analysis done, but a tentative conclusion was that the banks are sitting on a pretty big stockpile already and can't afford to 1. manage the stock properly, 2. let the market decline through providing supply. Of courss the pollies are in the same boat - they own bank shares and collect property taxes. There is no way these taxes are going to apply to banks, but Self-Managed Superannuation (oh yes, its a thing) funds left holdng the bag are in for a shock.

A good thing about the Chinese being here - they know what it is to be fucked over by gummint and they're more than happy to join in on the scam. 

Yen Cross's picture

  Well copper, gold, and various grades of iron ore, are getting hammered.

  We all know the linkages of the $Aus and how much foreign borrowing takes place to support those interest rates.

 The big four Australian banks are very heavily hedged with foreign investments.

  P.S. I just watched the Ray Dalio interview with Maria Bartiromo, and this guy is completely out of touch with reality!

  That idiot has no understanding of excess flows created by C/B's which completely distort his models.

  That's why the clown is writing books.

thefinn's picture

Also real estate though. I remember reading somewhere that real estate (not all home properties I'm sure) in Australia accounted for 65% of retirement fund investment.

 

If the housing bubble goes - everything goes.

McNoob's picture

Throw the Real Estate Bubble down the well...

So my country can be free...

We'll buy homes without a mortgage...

And we'll have a big PARTYYY!

Throw the Real Estate Bubble down the well...

Wile-E-Coyote's picture

No, just remove the distortions.

Benjamin123's picture

Any influence i dont like=Distortion.

HankPaulson's picture

Perhaps a more accurate headline would have been:

"Australian Politicians Contort Themselves to Appear to Crack Down on Foreign Real Estate Buyers, While Doing the Exact Opposite and Collecting More Tax Along the Way, While Locals Look Desperately for Their Fourth or Fifth Investment Unit".

Father ¢hristmas's picture

 

“What next?" said Monika Tu, the Sydney-based director of Black Diamondz, which specializes in high end property sales to mainly Chinese buyers. "Shall we tax people who buy new shoes and don’t wear them?’’

 

 

 

 

 

 

 

What next?" said Monika Tu, the Sydney-based director of Black Diamondz, which specializes in high end property sales to mainly Chinese buyers. "Shall we tax people who buy new shoes and don’t wear them?’’

You ain't know, Monika?  The white man changes the rules as he goes lol

Then, when the Chinese are long gone, and the gubmint intrusion and higher taxes remain, these Crocodile Dundee Foster's Beer drinking put another shrimp on the barbie motherfuckers will be shooting tears out their ass again.

HankPaulson's picture

"Monika" (you know her real name's not Monika), is referencing her ideological idol, Imelda Marcos:

"Marcos is infamous for her extravagance. This included owning more than a thousand pairs of shoes, some of which are now housed in a museum in Marikina." Wikipedia.

 

lincolnsteffens's picture

From what I recall about Imelda Marcos from the other side of news media sensationalism is that all those shoes were gifts from Philippine shoe manufacturers. Imelda was a victim of propaganda and prosecution from those that sought to steal the "supposed" Philippine/Marcos stash of gold. It is not as if Imelda decided she needed or deserved to have any excess she desired at the expense of the Philippines. The shoes were presented as gifts to the head of State. It made for a useful catch phrase, repeated over and over in the media ( sound familiar?- That kind of repetition is one of the main tools of mind control. ) for character assassination.

My source about the shoes and the character of Mrs. Markos is Gerry Spence who helped defend her. Spence defended the poor and wealthy. Spence said she was really a naive simple woman. As soon as I typed in her name on a net search the first thing that popped up was "shoes".

From the NYT article about her verdict of innocent ( 7/3/1990 ) on all counts, "The jurors said they were not convinced that Mrs. Marcos knew about any wrongdoing, and questioned why the case was tried in the United States. On their very first ballot, in the first moments of deliberations, they voted 10 to 2 to acquit her."The press and prosecution propaganda remains as a guilty concept in the residual memory in the US public's mind. She is remembered as a disgraceful and corrupt woman.

" jury forewoman, Catherine Balton. ''There was no evidence. There was nothing to convince any of us that there was a case.''

PhilofOz's picture

Shows how little you know.... Aussies stopped drinking Fosters 30 years ago when it became mass produced swill for the international market. I'll bet you any amount that Fosters in Australia accounts for less than 1% of the beer market here, and I'll give you odds!

pitz's picture

Little to no foreign money in Vancouver or Seattle.  Its the locals, borrowing their brains out.  Particularly Indian-ethnicity people. 

HRH Feant2's picture

Obviously you have not been to Vancouver BC. I have visited British Columia, at least once a year for my entire life. My last visit was shocking. Chinese tourists on the waterfront. Pakis driving cabs. White people at the front desk. Pakis at the Hortons. Indians as hotel maids. Local casinos full to the top of Chinese. You can tell by who does the dirty work and who parties who is in control of a place. I can verify that the Chinese own Vancouver BC. Everyone else is a fucking slave.

Who were the down and out in Gastown? Whites and First Nations people. Sickening.

Archive_file's picture

"White people at the front desk."

"Chinese at the waterfront."

"Everyone else is a fucking slave."

WELCOME TO SAN FRANCISCO.

HRH Feant2's picture

At least SF still has white tourists. Vancouver? Not so much.

shrimpythai's picture

am 17 years out of Vancouver - but lived there 26 years - and YES the chinese do basically own Van - and Richmond. When the gov sold the Expo lands way back to Li Ka Shing from Hong Kong that was insane - 100 acres of False Creek old factory area for 150 million - and the government even cleaned up all the old dirt for him - first hi-rise apartment building covered the 150 million and even went on sale first in Hong Kong! - now many hi-rises in the false creek area. Was a sweetheart deal for LKS after he helped bail out the bank of BC I think  - forget all the details

oops  - pays to look up the story 5 5 5   320 mill but cost the gov 150+ mil to clean up the old dirty dirt from 100 years of sawmills  - the Golden Man they call him - and they will do it to Melbourne as well if not done already

http://www.cbc.ca/news/canada/british-columbia/expo-86-china-business-va...

cannuck21's picture

Yep absolutely right. Spent many years in HK and listened to the constant and open rhetoric about the Canadian being so dumb (you can always cheat a foreigner as the saying goes). The talk was always that the Canadian could never track a Chinese name...so buy now!

Now I live on the Island and see the mess that Vancouver has become - a place that my family for generations grew up in. No longer affordable for locals. 

 

HRH Feant2's picture

I feel your pain. Vancouver used to be a beautiful city. Great place to visit, safe, clean.

If you are white? Yep, you will get ripped off. Or worse.

HRH Feant2's picture

I am not Canadian but glad you escaped. You have to know Gastown. It is sick to see white boys out begging and white women and First Nations are the prostitutes.

I doubt I will visit Vancouver again. Too many slant eyes and too many pakis. I don't want them touching my sheets or washing a coffee cup. Great way to catch Hep A or Hep B.

Bay of Pigs's picture

I have RE friends in both cities. You are full of shit pitz. Find another board to spew your lies and propaganda.

HRH Feant2's picture

Communism is a plague. Even rich communists suck (look no further than HIlliary, Bezos, and Zuckerbutt). The rules don't apply to them. One more reason to hate them. Always exploiting the rules to gain advantage. But if a serf dares step out of line? They are crushed. Or their organs are sold.

Benjamin123's picture

But confiscating private property is not communism, eh?