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  • Profile photo of FreckleFreckle
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    .China's Latest Corruption Target: Overseas Real Estate

    China’s corrupt officials and crooked businessmen have smuggled billions of dollars overseas, much of which has ended up in real estate in the United States, Canada, Australia and the United Kingdom—particularly in high-end neighborhoods in London, New York, Los Angeles, Sydney and Toronto. Now the Chinese government is embarking on a worldwide hunt to seize the properties with help from foreign governments, according to asset recovery and anti-corruption specialists.

    This could present a serious problem for investors holding property in Chinese preferred markets such as Sydney and Melbourne. The Chinese are estimated to poor as much as $1B/yr into each market. Even a modest slowing of this flow could have a profound impact on values. I've mentioned on other threads how the FIRB virtually ignores foreign investors who circumvent FIRB requirements. A little prodding from China might just change that.

    Abbott is pushing to complete a FTA with China that has been in the pipeline for some eight years.  My guess is that if the Chinese are serious they certainly have the muscle to move the AU govt where ever they want.

    Profile photo of TerrywTerryw
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    Good news. Considering the penalties in China and the lack of proper legal process I find it amazing that anyone would give it a shot. The penalty is often death without a fair and proper trial.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of Hari YellinaHari Yellina
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    Dear Freckle, 

    I am Hari Yellina, Keen property Investor, researcher and Australian Exporter. I would like to mention few points on Chinese and Indian purchases in Western Countries. 

    • 2% of New purchases are only done by Chinese and Indian buyers. 
    • 80% of overseas purchases are from UK and USA 

    Few sales from Chinese and Indian buyers wont hurt the Market at this stage. 

    Lot of people in western countries have a assumption all the corrupt money is brought from China and India for Investments here. Which is completely un true. When a Investor wants to bring money from China / India. They will need to get approval from People's Bank of China and Reserve Bank of India. This banks work under strict guidelines. Where the money has come from once this banks approve, they are good as gold. 

    Rest assured any Investments from China and India are not as most of the people presume to be corrupt. 

    Chinese and Indians place a high value and deep respect from Western system of Investing and they place their in our hands with a high trust. Most of them are middle class families who would like to buy some property for their kids. Very few wealthy are buying big investments. Lot of developments which are purchasing land for construction in the capital cities are trading on Share market and they are public limited companies. 

    As they place Australian is such a high regards, we should respect the Investors as well. 

    I am keen Investor in Australia myself and in double digits. All the money we have earned to Invest in Australia, is by working 16 hours a day for decades and all our family goes works hard and save to invest in better economies. 

    We do buy shares Apple Computers, Coca Cola, and google. Like anyone who have trust in big companies, we place our trust. Not because we are got corrupt money. 

    Please post if you have any more questions. 

    Thank you

    Hari Yellina

    Property Investor 

    Australian Exporter.

    Hari Yellina
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    Profile photo of i-smsfi-smsf
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    I would have thought there would be more Chinese investors in Au property, but even under the Significant Investor Visa, which was dubbed as the 'Chinese investor magnet' (http://www.businessspectator.com.au/article/2013/6/21/national-affairs/doubt-sucking-value-investor-visas) has only drawn 171 applicants… 

    Apparently this scheme has attracted negative press in China as a lot of this investment has gone into numerous unsuccessful and dubious unlisted property trusts and the like.

    Profile photo of tommytuckertommytucker
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    Sounds like poor investment selection to me.

    If they have significant funds they should do what the American super funds are doing and collateralise residential rents. I've no idea if this is legal in Australia but I hope to hell that it isn't. I don't think large scale investors should be allowed into the residential markets as it would have too great an impact on prices.

    Profile photo of FreckleFreckle
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    yellina wrote:

    • 2% of New purchases are only done by Chinese and Indian buyers. 
    • 80% of overseas purchases are from UK and USA 

    Few sales from Chinese and Indian buyers wont hurt the Market at this stage.

    Tell it to John McGrath

    Chinese Buy Sydney Homes at Unprecedented Rate, McGrath Says

    As much as 80 percent of homes in parts of Sydney are being sold to Chinese buyers, John McGrath, chief executive officer of the company that recorded A$7 billion ($6.5 billion) of property sales in the year to June 30, said in an interview in Sydney yesterday. Record-low interest rates and the biggest influx of investors in almost a decade are also fueling prices.

    Profile photo of Hari YellinaHari Yellina
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    Dear Freckle, 

    Chinese Real Estate investments in this Country include $4.1 billion dollars, This includes farm lands / New developments / Existing. As a Chinese investor we are not allowed to trade in Existing houses. As long as they are going to build a new house. 

    $4.1 billion is tip on Ice berg. USA and UK far outweigh Chinese investments. $60 billion is invested by top countries in Australia. You can see they are less than 8%. If we look into residential real estate is less than 2%. 

    Australia Imports from China is around $38 Billion. 

    Australia exports to China is around $80 Billion. 

    Balance of Payments in favor of Australia. Not China. 

    Australia makes more money by Trading with India and China, It not the other way around. 

    Any Investment done is Australia has to be approved Foreign Investment Board. Chinese buy what we don't want to Invest in. 

    John McGrath says what ever he likes without going to through the Government Stats. Even the media who interviews them has no idea. As a General public we should be better informed. 

    Thank you

    Hari Yellina

    Australian Exporter 

    Property Investor & Researcher. 

    Hari Yellina
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    Profile photo of FreckleFreckle
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    Hari, govt stats are in the main years out of date and their accuracy is questionable at the best of times. In terms of RE data and who's buy what there are no really definitive numbers only estimates. Forget FIRB data… it's rubbish. They're an admin org not a policing org. The Chinese have more back channels to invest/buy RE than you can poke a stick at.

    RE agencies and large property developers are and have developed significant marketing and sales strategies around asian investors. The big guys maintain sales offices overseas for this purpose.

    McGrath's comments give you a peak at the real picture. He should know.

    The problem with foriegn investment especially one with no real controls is that it will cook local markets eventually. Fed and State govt's couldn't care less and won't do anything tangible to stifle foreign investment. It helps fill the very depleted coffers. They will pay lip service but do nothing.

    Profile photo of Hari YellinaHari Yellina
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    Dear Freckle, 

    Thank you for your comment. I can see your point. If they are investing under back channels. It can happen sometimes. Thats is very minority. About Australian FIRB. The data is updated instantly. 

    Australia has more regulations than any other country and pretty much safe. The big real estate developers have offices overseas and targeting Asian Investors. They are for apartments selling for high price. Thats good for Australian economy. 

    All the Auctions results we see every week are from Established homes, not new properties. Because it is such a small proportion. When you goto Auctions you might find Indians and Asians. most of them are Australian Citizens. 

    John Mcgragth said "Some parts of Sydney 80% of Chinese Investors". He has choosen his words very carefully. In some parts, which can mean a single residential complex. 

    I will post more data in coming days on this subject. Thank you 

    From : Hari Yellina. 

    Hari Yellina
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    Profile photo of FreckleFreckle
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    Latest available FIRB report;

    Foreign Investment Review Board Annual Report 2011-2012

    Main points

    •     In 2011‑12, 10,703 proposals received foreign investment approval, compared with 10,293 in 2010‑11 (the sectoral breakdown below excludes 81 reorganisations).

    1.         The real estate sector recorded 10,118 approvals, compared with 9,771 approvals in 2010‑11.
    2.         Other sectors also had an increase in approvals with 504 approvals in 2011‑12, compared with 448 approvals in 2010‑11.

    •     Approvals in 2011‑12 were given for $170.7 billion of proposed investment. This represented a 3.4 per cent decrease on the $176.7 billion in proposed investment approved in 2010-11.

    1.         In real estate, approved proposed investment was $59.1 billion in 2011‑12, compared with $41.5 billion in 2010‑11. The increase is attributable to proposed investment in commercial real estate, which increased from $20.6 billion in 2010‑11 to $39.4 billion in 2011‑12. Proposed investment in residential real estate decreased slightly, from $20.9 billion in 2010‑11 to $19.7 billion in 2011‑12.
    2.         In other sectors, approved proposed investment in 2011‑12 was $111.6 billion, a decrease of 17.5 per cent compared with the $135.2 billion approved in 2010‑11.

    •     In 2011‑12, 13 proposals were rejected (compared with 43 in 2010‑11). All of these related to real estate purchases.
    •     The real estate sector was the largest destination by value, with approvals in 2011‑12 of $59.1 billion. In 2011‑12, the other major sectors were: mineral exploration and development, with approved proposed investment of $51.7 billion; and manufacturing, with approved proposed investment of $29.5 billion.
    •     The United States ($36.6 billion) was again the largest source country for approved proposed investment in 2011‑12. Other major source countries of approved proposed investment in 2011‑12 were the United Kingdom ($20.3 billion), China ($16.2 billion), Japan ($13.9 billion) and Canada ($8.9 billion).
    •     On 24 October 2012, the Deputy Prime Minister and Treasurer announced the appointment of Mr Michael D’Ascenzo AO to the Board. His five-year term will commence from 2 January 2013.

    Anecdotal reports suggest that RE purchases out of China are increasing not only in AU but globally. The speculation is that as China's financial system exhibits increasing signs of instability those who are able to and have channels to shift capital across borders are doing so in increasing numbers. Chinese leaders are looking to minimise this type of capital outflow but their reach has it's limitations and isn't as easy as simply giving executive orders. Corruption is endemic and considerably more difficult to control than most westerners understand.

    To get an idea how Chinese money is flowing into RE markets you need to also consider other international markets. A couple of recent examples that are generating problems for those markets.

    Vancouver’s Skyrocketing Housing Prices: Are Mainland Chinese Investors To Blame?

    • Citing data from Landcor Data Corp., the South China Morning Post reported that in 2010, among purchases of luxury homes and properties in Vancouver’s West Side district, as well as the satellite city of Richmond, an overwhelming majority (74 percent) involved buyers with mainland Chinese surnames.

    Top 10 U.S. cities for Chinese homebuyers

    • Where are they buying?

      New York and Los Angeles top the list of U.S. cities they are most interested in, according to Juwai.com, a website where Chinese buyers browse global real estate listings.

      More surprisingly, Philadelphia and Detroit come in at No. 3 and No. 4.

    China's Colonization Of London Hits Ludicrous Speed, And Now: It's Detroit's Turn

    • "We expect the pool of investors from China targeting London to grow significantly in the coming years. They will consider everything from urban regeneration sites through to trophy assets,"

    Chinese Buyers Sway Australia Property Market

    Citigroup Economists Find Correlation Between Chinese Immigration, Real-Estate Prices

    • Mr. Simeon, who has sold close to A$30 million worth of homes to Chinese buyers in the past few months alone, has to work in bulk to meet demand from wealthy clients. "I'm putting them on a bus and taking them around and then trying to find out their price ranges," he said.

    Chinese new wave rocks property market

    • Mellor estimates 17,000 apartments will be built in inner Melbourne during the next three years – with many of the projects undertaken by Asian developers.

      "It's an accident waiting to happen," says Mellor of the inner-Melbourne apartment market.

    I'm not a big fan of MSM reports but where there's smoke there's fire as they say.

    Profile photo of Hari YellinaHari Yellina
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    Dear Freckle. 

    You are right. Do you think this is all Illegal money invested here in Australia. 

    Thank you

    Hari Yellina 

    Property Investor. 

    Hari Yellina
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    Profile photo of TerrywTerryw
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    yellina wrote:
    Dear Freckle. 

    You are right. Do you think this is all Illegal money invested here in Australia. 

    Thank you

    Hari Yellina 

    Property Investor. 

    Certainly not all. But lots of illegal money lots and lots!

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of BennyBenny
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    Quote:
    Mellor estimates 17,000 apartments will be built in inner Melbourne during the next three years

      Many years ago, I became aware of a useful piece of knowledge that has had me very wary of apartments ever since….  

      In short, the FIRB allows overseas investors to buy new property only.   I heard back then that around 50% of new apartments (large, high-rise in major centres) were sold overseas.   The problem only appears when overseas events (e.g. GFC, etc) lead to the overseas owners selling their apartments in quantity.   With them now being second-hand, they CAN'T be onsold to overseas buyers, so the sales are into a market that is now 50% smaller than before……

      Perhaps this is a major factor in areas like the Gold Coast and its "wild swings" in apartment prices.  Talk about upsetting the supply/demand curve !!!

    Benny

    Profile photo of Hari YellinaHari Yellina
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    Dear Benny, 

    If you look at the apartments coming into Melbourne market in next 5 years are 17,000. Half means 8500 are purchased by overseas buyers. 

    In that overseas purchased, Indians, Chinese, Indonesians, Singaporean, USA, and UK. All of them have to share. So, lets say the share of the Chinese will be around 1000.00. 

    1000 sales is not close to one Saturday Auction sales in Australia. We shouldnt worry much about Chinese buyers. They are actually bringing money into our country. 

    Do you think it is good or bad they are investing in Australia. 

    Thank you

    Hari Yellina.

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    Profile photo of BennyBenny
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    Hi Hari,

    Quote:
    Do you think it is good or bad they are investing in Australia

      I have no issue with overseas investors from any country, Hari.  

      My point was more that some of the current laws seem to have "unintended consequences" – like, creating negative spikes in values for Mum and Dad investors here.

      Can you see that the FIRB laws should perhaps be reviewed and/or re-drafted?

    Benny

    Profile photo of FreckleFreckle
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    yellina wrote:

    1000 sales is not close to one Saturday Auction sales in Australia. We shouldnt worry much about Chinese buyers. They are actually bringing money into our country.

    Hari you're academic ability belies your lack of understanding in RE markets and economics in general

    Quote:
    Do you think it is good or bad they are investing in Australia. 

    Bad. If you don't understand how CB printing pushes capiatal flows across borders distorting markets then you need to revisit economics 101.

    Profile photo of FreckleFreckle
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    Benny wrote:

      Can you see that the FIRB laws should perhaps be reviewed and/or re-drafted?

    FIRB are your typical toothless govt org. Their primary role is to to validate large commercial activity not penny ante RE purchases from the odd foreigner or three.

    Profile photo of Hari YellinaHari Yellina
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    Dear All, 

    This is quite a fascinating discussion. 

    We have wannabe buyers being outbid at auction and complaining because the successful buyers were Asian-looking and therefore, according to the aggrieved parties, Chinese investors. They could be third-generation Australians, for all they know.

    It’s reminiscent of the eighties, when high levels of Japanese investment allowed newspapers to whip up a xenophobic frenzy.

    This current fear that the Chinese might buy all our property is nothing but xenophobia

    Developers have always targeted distant investors to, firstly, get rid of unsold dwellings for which there are no genuine local buyers – and, secondly, to go a step further and create new stock specifically to sell to distant investors, notwithstanding the local over-supply or depressed market.

    Do we need to stop all the trade in the world. Just because we are paranoid. 

    Thank you

    Hari Yellina 

    Property Investor. 

    Hari Yellina
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    Profile photo of FreckleFreckle
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    yellina wrote:

    This current fear that the Chinese might buy all our property is nothing but xenophobia

     

    A conclusion that uniformed people sometimes draw but completely inaccurate. I would take the time to explain it to you but i fear it will simply go in one ear and out the other.

    Profile photo of Hari YellinaHari Yellina
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    Dear Freckle, 

    Please post your opinion in this post. Thousands of people are reading this forum. They have to be informed. People like me and Australian Government should know the facts about chinese.

    Thank you

    Hari Yellina.  

    Hari Yellina
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