Chinese-Australian real estate agent Monika Tu, of Black Diamondz Concierge, launched a property-buying blitzkrieg, with a fleet of cars ferrying potential buyers around the best prospects in Sydney’s Vaucluse and Bellevue Hill.
The high-end property boom in Australia is replicated in similar, Chinese-driven property booms in sectors of the market in London, Singapore, and in Vancouver before the Canadian government banned non-resident foreigners from owning homes.
Record migration and China’s post-pandemic reopening have sparked a surge of foreign investment in Australian property, and international agents are reporting a more than 400 per cent increase in inquiries.
Government approvals are up 40 per cent in the past quarter, compared with the previous year, and buyers from mainland China, Hong Kong, Taiwan and Vietnam are leading the influx.
According to a recent NAB residential property survey, the share of total market sales to foreign buyers had increased for the fourth straight quarter, to a 5½-year high.
The real figures could be much higher, because market players privately report that financial proxy arrangements, rapid name changes, and dummy intra-family “sales” often obscure the real purchasers’ identity.
The complexity and opaque nature of such arrangements makes their true significance hard to quantify. However, their increasing prevalence is suggested by the sharp rise in vacant houses reported in Sydney’s Vaucluse, and hinted at in fliers offering to introduce homeowners to “a wider market”.
Several Vaucluse residents say that in their streets, half the properties sold to Chinese purchasers remain vacant. But these residents refuse to go “on the record” – in other words, they will not associate their own names with the claims they were making.
One explanation discussed in private is that the properties have been purchased with mainland money made anonymous through Singapore family trusts. Local taxes and charges for foreign purchasers are voided by further “sales” to other family members with permanent residency status in Australia.
Forbes Global agent Tracy Belcher, who largely deals with Chinese clients, says Chinese buyers are notoriously private, purchase off-market and are increasingly upgrading to blue-chip locations such as Toorak or Brighton, after several years of living in Australia as a permanent resident.
Black Diamondz’s Tu says every year there is an influx of Chinese buyers who come to peruse Australia’s prestige properties, and this year is set to be the most lucrative yet.
“We have a lot of interest in the $100 million Crown penthouse [in Sydney’s Darling Harbour], the upper north shore, lower north shore, city apartments, and of course, the eastern suburbs,” she says.
“We work as a concierge, we have a fleet of cars ready to show Chinese buyers local property, and our team is working seven days a week.”
But there is blow-back. Singapore has doubled stamp duty for foreign property buyers. The island state is also scrutinising the real provenance of anonymous, foreign-owned family trusts after the emergence of a giant money-laundering scandal.
More widely, property purchases by foreigners are now banned in Canada, New Zealand, Thailand and on the Indonesian island of Bali, but not elsewhere in Indonesia.
The Australian implications of the Singapore money-laundering investigation are significant because these trusts can be used to obscure the identity of rich Chinese buying abroad, including the purchase of Australian property.
Money-laundering scandals in Singapore and Australia have not tainted a boom in sectors of the London real estate market fuelled by former Hong Kong residents carrying British passports fleeing a crackdown by Chinese authorities.
However, London councils do have the authority to increase charges on vacant homes by up to 200 per cent, and a growing list of US states have banned Chinese property purchases in many areas for “security” reasons.
The “China factor” is also lurking behind Canada’s two-year ban on foreign property purchases, introduced on January 1.
“The idea is that the ban will prevent non-Canadians from buying homes, freeing up those properties to Canadians,” conservative US business magazine Forbes commented. “But, like many laws in Canada, the ban’s rules, implications and effects are more complicated than you may expect.”
They are realising the capital gain in Sydney’s east is next level.
— Property agent Michael Pallier
Meanwhile, local sensitivities about relations with a country that accounts for one-third of Australia’s two-way trade mean any proposed extra federal levies and charges for foreign property purchases, or vigilance in ensuring current restrictions are not easily sidestepped, are not regarded as suitable candidates for the political bullhorn.
The issue has escalated at a time when Anthony Albanese is making the first visit to China by an Australian prime minister in seven years.
A spokesperson for Treasurer Jim Chalmers says foreign investment “plays a crucial role in Australia’s economic success and our settings are designed to ensure Australians benefit from foreign investment here.”
“We keep monitoring rules that apply to residential property to ensure foreign investment helps promote new housing supply,” the spokesperson says.
Publicly, politicians and officials in Canberra tread warily, mindful of how China slapped a ban on $20 billion-plus worth of exports of Australian coal, wine, fish and forestry products in 2020. Beijing’s “wolf warrior” punishment of Australia came after the Coalition government called for an independent global inquiry with weapons inspectors-level power to investigate the origins of the pandemic.
Sensitivity about foreign high-end property buying is not as prominent with state governments. On October 3, the Victorian government announced it would virtually double its tax on vacant land. “Our clear message to the landowners is to either develop the land or sell it to someone who will,” Treasurer Tim Pallas said.
However, Pallas did not explicitly link the decision to foreign buying, and local developers may be the more obvious real targets.
NSW Premier Chris Minns has ruled out tackling a statewide housing crisis by imposing a Victoria-style empty home tax – an impost that could affect suburbs such as Vaucluse and Bellevue Hill.
Hostility to foreign buying is gaining some public attention. Sydney 2GB radio host Ben Fordham has said Australia should copy Canada and ban foreigners from buying investment properties. “The politician who has the guts to do it will be hailed a hero,” Fordham said.
Real estate auctioneer Tom Panos, a regular on Channel Nine’s The Block (Nine Entertainment owns 2GB, Channel Nine, and The Australian Financial Review), told Fordham the reported $8 million a day spent by Chinese investors on Australian real estate was a conservative figure, and the real amount was “actually a lot higher”.
Panos claimed that on occasions what appeared to be an Australian buyer at auction was actually someone representing an investor from Hong Kong or China. “When you look at the money trail, you find that they’re actually representing an overseas buyer,” he said.
However, he did not provide evidence. Reflecting popular ambivalence on the issue, Panos acknowledged foreign-sourced property purchases were “actually helping the market stay relatively good in prices even though we’ve had 12 [interest] rate rises”.
According to Forbes’ Belcher, the catch-all term “Chinese buyers” covers two broad categories: Chinese-born locals with permanent residency and Chinese nationals prepared to shoulder foreign taxes and fees to buy directly into the Australian market.
Cashed-up members of the first category have been buying up in premium suburbs, often moving from more historic Chinese diaspora suburbs such as Burwood and Chatswood in Sydney, or Glen Waverley and Doncaster in Melbourne.
In Sydney, eastern suburbs prestige agent Peter Leipnik, of Bradfield Badgerox, has observed a significant increase in the number of Chinese buyers seeking blue-chip property.
Sydney’s agents cite harbour and bridge views, plus proximity to exclusive private schools such as Ascham, Cranbrook, Scots and Kambala, as common factors enticing Chinese buyers.
“The Chinese market has been particularly strong in the past six months following the lull during COVID,” Leipnik says. “A lot these Chinese buyers are looking at Vaucluse and Bellevue Hill to send their children [to] eastern suburbs schools.”
This year, the top 2 per cent of Sydney houses – those priced about $5 million and above – have increased in value by 11.5 per cent, according to data house CoreLogic.
However, property observers caution that in the tightly held nosebleed section of Australia’s property market, precise growth data is hard to come by, given the small number of transactions and like-for-like sales.
Anecdotally, the evidence is strong. Sotheby’s Michael Pallier says he’s witnessing a continued increase in demand. “There has been a big wave of immigrants, and it’s been fantastic for the upper end. A lot of them are from Asia, buying very nice properties before the new school year.
“Interest rates have gone up [but] the Australian dollar going down and the migration that’s kicked in [have] more than offset that.”
The Sotheby’s agent, who specialises in high-end sales in Sydney’s blue-chip east, says a lot of his recent Chinese clients are returning to Australia after receiving their education here in the late 1980s.
“They’ve been here for uni; they’ve gone back to China and made their money; now many are between 50 and 60 years old and want to return and enjoy the Australian lifestyle.”
Sean Huang, who runs eastern suburbs buyers agency Concierge East and specialises in Chinese-language sales, says: “Most of our buyers have a budget between $10 and $30 million, and they’re looking for a family home.”
Pallier adds: “Five to 10 years ago, Chinese buyers thought [Sydney’s] north shore and inner west were the places to be. Now they are realising the capital gain in the east is next level.”
He maintains that 95 per cent of purchasers are ethnic Chinese – people who have Australian citizenship, or are permanent residents – and just 5 per cent come from the Chinese mainland.
However, this estimate does not take account of the money trail from Australian home purchases back to Singapore-based, Chinese-owned investment trusts.
Huang says Chinese nationals face prohibitive costs that can outweigh prospective capital gains, meaning most Chinese buyers will wait to obtain permanent residency before buying.
“If you look at a property worth $20 million, $1.6 million is stamp duty, land tax is an extra 4 per cent on top of 1.6 per cent, and then FIRB [Foreign Investment Review Board] is sliding scale, but application fees alone can be $200,000,” Huang says.
“When people do the maths it’s probably better to wait for PR [permanent residency].”
A recent example of Huang’s “5 per cent” is reflected in NAB director Ann Sherry and husband Michael Hogan’s sale of their Annandale, Sydney, mansion known as The Abbey, featuring a pool and tower, for a suburb record of $12.5 million.
The purchaser was Chinese art collector Jingzu Chen, who received FIRB approval.
In Toorak, a Macquarie Road property was recently sold to relocating Chinese vendor Chengzhou Xia – understood to have provisional PR – who paid just under $30 million for the luxury home with pool, tennis court and proximity to Melbourne’s best schools.
Recent examples of local Chinese upgrading and upsizing include Zhenni and Guoliang Yang’s $31.6 million purchase of the luxury Brighton mansion belonging to the late co-owner of 7Eleven, Beverley Barlow, resetting the Bayside suburb’s price record in the process.
Both underscore Australia’s emergence as the top destination for Chinese property investors, according to data from international real estate group Juwai, which analysed buyer enquiries received through the first six months of 2023.
This is reinforced by Treasury data which shows China was the largest source of foreign residential real estate approvals granted by the FIRB last year.
Almost 1800 Chinese buyers were granted approvals to purchase $2.4 billion of residential real estate in 2021-22, slightly down from the $2.7 billion worth of approvals granted in 2020-21.
While non-resident Chinese buyers own a small portion of Australia’s housing stock, research by the Reserve Bank of Australia in 2015 found they were accounting for an increasing share of real estate purchases.
A government spokesperson says these purchases are largely concentrated in off-the-plan apartments (especially in Sydney and Melbourne), in part because all foreign buyers, other than temporary residents, are generally restricted to purchasing newly constructed dwellings.
Meanwhile, the Albanese government has tapped into foreign enthusiasm for Australian real estate as a source of extra revenue.
Foreign investors will be slugged an estimated $455 million extra in FIRB fees over the next four years, under a Labor election commitment that was implemented in July last year.
In addition to state stamp duties, foreigners buying a $2 million residential property will pay $26,400 in FIRB application fees, and the foreign purchaser of a $5 million residential home will pay $105,600.
The increased charges follow the former Coalition government imposing tougher foreign investment screening rules to protect national security.
This included the power for the treasurer to unwind a foreign takeover, enhanced information-gathering powers for Treasury, and tougher perusal of deals involving “critical infrastructure” such as energy assets and data-rich entities.
The temptation for any prospective foreign purchaser – Chinese or otherwise – to enter into financial surrogacy arrangements is obvious.