Chinese buyers snapping up Australian Homes Article &Purchase of Australian Property : FIRB Approval & Process

As Four Corners reported on Monday, the number of Chinese investors buying Australian real estate is skyrocketing, surging more than 400% in the past five years. Chinese buyers are buying property, sight unseen, trusting in local agents to find them profitable investments. But why is Australian real estate so attractive to the Chinese? Where are they hearing about it? And don’t we have laws against letting foreign buyers purchase land here?

Why are Chinese buyers snapping up houses in Australia?

Australia’s lifestyle and potential profits are the main reasons why Chinese investors are looking for houses in Australia. Chinese investor Tan Jie told Crikey that even though Australia’s property market is booming, prices were “inexpensive” compared to China’s big cities.

“The price of a small house in Melbourne could be equal to that of an apartment in Beijing. The living environment in Australia is much better than China,” she said.

Chinese buyers also buy Australian property to house their children while they study at Australian universities, with the intention of selling or renting out the property when studies are finished.

“Universities in Australia are very elite in the world, and I think my daughter should receive higher education in a developed English-speaking country to increase her employability. If I buy a house, she would have higher chances of staying in this country,” Tan said.

How do Chinese investors find out about Australian property?

Real estate agencies are targeting Chinese investors through advertisements on popular Chinese social media WeChat.

One WeChat official account, “MelBuyHouse”, regularly sends posts in Mandarin about properties for sale in Melbourne. A real estate post typically gets about 2000 views. People can share the posts on their WeChat timelines and directly to their friends.

The real estate posts on MelBuyHouse are mostly promotions for real estate agencies, but the posts often start off with some tips for Chinese property buyers on how to choose a good location and how to”‘secure” their purchase.

The agencies featured on MelBuyHouse have Mandarin-speaking employees who can assist Chinese buyers without much English.

Real estate agencies are also sending representatives overseas to introduce their Chinese clients to the potential investment profits and advantages of Australian residential properties.

Real estate agent Irvin Li told Crikey that 90% of his clients were Chinese. The agency Li works for sells apartments in a building in the Melbourne suburb Glen Waverley, a popular destination for Chinese investors. Li says most of his clients are attracted to the location.

“Our location is very appealing, with the shopping centre and restaurants at the footstep. Many Chinese buyers also want to send their children to the nearby Glen Waverley Secondary College. So these purchases are both of investment and residential purposes,” he said.

But wait, aren’t there laws to prevent foreign ownership of existing housing stock in Australia?

Australia has increased its tax on property investments by foreigners earlier this year in an attempt to discourage foreign investors from buying houses in Australia.

Under current law, foreigners cannot buy established properties but can buy lands and newly built properties. Foreigners buying established homes in Australia could face three years’ jail term and a fine of up to $135,000. The Four Corners investigation revealed many buyers are flouting those laws, however.

The Australian Taxation Office is currently investigating 500 cases of foreign buyers breaching the rules and buying established homes, reported ABC News. Some of the purchases involved multimillion-dollar houses purchased by international students with no income.

Tax Commissioner Chris Jordan told Four Corners that a 21-year-old student buying a $5 million waterfront house was a clear breach of the rules. “So the obvious question for us is, where did the $5 million come from to buy that property?” he said.

Former AUSTRAC boss John Schmidt told Four Corners that foreign investors were using relatives and setting up shell corporations to mask the real motive behind the purchases, but “they are the ones behind the scene pulling up the strings”.

An ATO spokesperson told Crikey that the ATO was continuing the investigations and the majority of these were resulted from community referrals. But the number of Chinese investors has not decreased.

“There are no restrictions on the number of vacant land, new properties, or established dwellings for redevelopment that foreign investors can receive approval to buy,” the ATO spokesperson said.

Courtesy of LJ Gilland Real Estate

The Purchase of Australian Property by Foreign Residents

Purchase of Australian Property : FIRB Approval & Process

The rules surrounding the purchase of Australian real estate – by anyone other than Australian citizens and Permanent Residents – are reasonably complex and will become more so from December 1, 2015 with the introduction of new Foreign Investment Review Board (FIRB) application fees and a new compliance/penalty regime. These changes reinforce our stated view that no foreign investor should purchase Australian real estate without legal advice to ensure that they remain compliant with regulatory requirements.

At this point in time a greater emphahsis on compliance is appropriate; with inadequate enforcement leading to a lack of confidence in the community that investors and marketers are meeting FIRB requirements.

We have tried to simplify the often complex FIRB rules in the documents below. The first is a Guide focussed on explaining the purchase process for foreign citizens who are not resident in Australia wishing to invest in Australian property. The second document contains Flow Charts which attempt to summarise the FIRB rules as they apply both to Temporary Residents in Australia and Foreign Non-Residents (FNR) outside of Australia. These flow charts constitute our interpretation of the rules and are NOT intended to be relied upon – you are encouraged to contact the FIRB (www.firb.gov.au)

In terms of understanding the FIRB requirements it is worthwhile appreciating that no restrictions exist in relation to either Australian citizens or permanent residents (PR) purchasing property, and that foreign non-residents (FNR) may not own any share of an established property except in very limited circumstances. The most complex situations generally arise when purchases are being considered on a joint basis e.g. an Australian citizen plus foreign non-resident (FNR) citizen seeking to acquire property. We strongly recommend that foreign purchasers seek specific legal advice in advance of any purchase.

http://www.exfin.com/files/general_materials/FIRB%20Guidelines%20Flowchart%202014.pdf

Note that foreign investors intending to buy real estate in Australia have relatively open access to the Australian market and mortgage finance with mortgages up to 70% of the property value typically available, but they must seek prior approval from the Government through the Foreign Investment Review Board (FIRB) unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations.

Purchase of Australian Urban Property

The following individuals are not required to seek approval for the purchase of Australian residential real estate:

  • Australian citizens living abroad purchasing either in their own name or through an Australian corporation or a trust;
  • Foreign nationals who are the holders of permanent resident visas or are holders, or are entitled to hold, a ‘special category visa’ purchasing either in their own name or through an Australian corporation or a trust; and
  • foreign nationals purchasing, as joint tenants, with their Australian citizen spouse.

Foreign persons are normally given approval to buy:

  • Vacant land for development, including house and land packages where construction has not commenced, subject to a condition imposed under the FATA that construction is completed within 4 years of their application being approved for residential developments, or continuous construction is commenced within 5 years for commercial developments; and
  • New dwellings such as house and land packages, home units and townhouses purchased ‘off‑the‑plan’ that is under construction or newly constructed, but never occupied or previously sold. ‘Off‑the‑plan’ sales to foreigners are only permitted for new development projects or extensively refurbished commercial structures, which have been converted to residential, on condition that no more than half the dwellings in a development are sold to foreign persons.
  • Certain categories of foreign nationals, who hold a visa that permits them to reside in Australia continuously for at least the next 12 months, may be given approval to purchase established residential real estate (that is, second hand dwellings) for use as their principal place of residence (that is, not for rental purposes) while in Australia. A condition of such purchases is that the dwelling must be sold when the foreign nationals’ temporary resident visas expire, they leave Australia, or the property is no longer used as their principal place of residence.
  • Foreign companies, with an established substantial business in Australia, buying for named senior executives resident in Australia for periods longer than 12 months, may be eligible for approval provided the accommodation is sold when no longer required for this purpose. Whether a company is eligible, and the number of properties that may be acquired, will depend upon the extent of the foreign company’s operations and assets in Australia. Unless there are special circumstances, foreign companies normally will not be permitted to buy more than two houses under this category. Foreign companies would not be eligible under this category where the property would represent a significant proportion of its assets in Australia.

Proposals by foreign persons to acquire developed residential real estate that do not fall within the above categories are subject to the FATA, but are not normally approved.

All contracts by foreign persons to acquire interests in Australian urban land should be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract.  Contracts should allow a minimum of 40 days from date of lodgement for such a decision.  Foreign investors are in breach of the FATA if they enter an unconditional contract to acquire property before approval is granted and may be subject to significant penalties.

Source Materials FIRB Website

A Guide for Foreign Citizens Buying Australian Property 2016iii

About ljgrealestate 据联大

Removing the Hassle from Sales and Rentals across South East Queensland. Aim to Empower other like minded Property Investors. LJ Gilland Real Estate Pty Ltd LREA推荐书LJ Gilland房地产 http://ljgrealestate.com.au/testimonials/ http://ljgrealestate.com.au/competitive-commission/ http://ljgrealestate.com.au/property-management/ http://www.facebook.com/ljgrealestate L J Gilland Real Estate is a prestigious boutique agency specializing in Property Investment Management Services and the Sales of Investment Properties with tenants in place. Comprised of a top performing group of handpicked specialists, our Agents proudly serve Property Investors in Queensland. Since 1996 our Agency has demonstrated a genuine enjoyment of working with people, developing long-term relationships and delivering on the promise of great service. Carlos and Linda Debello offer property investor's the confidence to sell and lease in any market. We provide comprehensive market appraisals, exclusive multimedia marketing campaigns, and knowledgeable, highly personalized counsel on all aspects of real estate. Our Property Management Team is equally considerate, offering investors with in-depth advise, well-researched rental valuations, and highly professional rental management services. http://goanimate.com/movie/0M4bvcZzgIbI?utm_source=linkshare&uid=0u6RGtWsmlVc Carlos’ direct mobiles are 0400 833 800 & 0413560808. Linda’s mobiles are 0409995578 & 0414978700 (prefer email contact for Linda). Office 07 3263 6085. http://www.ljgrealestate.com.au http://www.yellowpages.com.au/qld/aspley/lj-gilland-real-estate-pty-ltd-14091356-listing.html http://au.linkedin.com/in/lindajanedebello http://twitter.com/GillandDebello http://www.facebook.com/pages/ljgrealestate
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