Chinese investors continue to snap up Australian real estate using a simple loophole to avoid Labor’s tax increase on foreign buyers.
A property group marketing Australian properties to wealthy Asian investors said Chinese investors now simply wait until they are granted permanent resident status before buying Australian property to avoid higher taxes.
“Rather than purchasing as a non-resident, most wait until they have permanent residency in Australia,” Juwai IQI co-founder and CEO Daniel Ho told Daily Mail Australia.
“If you know you are on track to obtain permanent residency, there is no reason to pay the additional costs that come with purchasing it as a non-resident.”
Chinese investors are now smartly buying property after becoming permanent residents to circumvent new rules aimed at foreigners (pictured, potential buyers in Sydney).
Peter Li, manager of Sydney-based Plus Agency, agreed, telling Daily Mail Australia that Chinese buyers would continue to buy local homes and push already high prices even higher.
“The trend among buyers… in 2024 will be similar to 2023: fewer offshore buyers and more onshore buyers,” he said.
“They buy for their own use or for their student children to live there.”
Foreigners are only allowed to buy an established property (i.e. not a new build) in Australia if they are residents and can prove they live, work or study locally.
But foreigners not living in Australia are only allowed to buy something that is new, in a bid to encourage the construction of more residential apartments to increase housing supply.
However, permanent residents are treated differently from foreigners and do not need FIRB approval to purchase new or established property or land.
They have much more financial freedom than temporary residents, such as international students, who are allowed to purchase an established property but must sell it six months after graduating if they are not granted permanent residency.
Treasurer Jim Chalmers and Housing Minister Julie Collins announced last week that the fee for foreigners buying established homes would triple, and the vacancy fee for foreigners leaving homes empty would double.
The New Foreign Procurement and Procurement Fee Imposition Amendment Bill 2024 It will apply to those who have purchased since May 9, 2017.
That means someone buying an established home worth less than $1 million will pay $42,300 instead of $14,100 to the Foreign Investment Review Board.
Someone who buys a home that is left vacant and not rented will see their annual vacancy fee double to $84,600, up from $42,300.
Rates for both categories increase based on property value, at thresholds of up to $40 million.
However, with record levels of foreign migration and permanent residency status granted so liberally, Labour’s new policy serves more as a tax-raiser than a meaningful attempt to cool Chinese demand and help young locals compete.
A property group marketing Australian properties to wealthy Asian investors made the revelation after the Labor Party announced a crackdown on foreign investors buying real estate without living locally (pictured, a Plus Agency agent working in Sydney).
Ho said his clients were wary of paying higher fees to FIRB, but the permanent residency loophole was an easy way around it.
“Owning a property as a foreign buyer, with the land tax and the tax on vacant homes, is more expensive than owning it after having permanent residence,” he said.
“So a number of factors are deterring non-resident Chinese buyers and encouraging them to buy once they have their residency in order.”
A Treasury report on foreign investment for the September quarter showed China remained the largest source of approved residential real estate, with $700 million in investment, followed by Hong Kong with $100 million.
Vietnam, India and Taiwan were also sources of investments worth $100 million each.
‘“China is still the number one investor, but what we see with our clients is that fewer and fewer overseas Chinese and Hong Kong buyers are buying,” Mr Ho said.
Plus Agency had 10 properties sold over Christmas and New Year, capping a year that saw annual sales of more than $200 million.
“The 10 holiday buyers we closed with during the Christmas holidays are from Hong Kong and mainland China,” Mr Li said.
“We see many Hong Kongers returning to Sydney during Australian holidays to see their children who live and work in Australia.”
Sydney, the biggest recipient of foreign migration, became even more expensive in 2023, despite the Reserve Bank raising interest rates in November for the 13th time in 18 months to a 12-year high of 4.35 per cent. hundred.
Despite higher monthly mortgage payments, Sydney’s median house price rose 12.8 per cent in the year to January to $1.395 million, CoreLogic data showed.
Net overseas immigration is also expected to moderate in 2024, after reaching a record 518,000 in fiscal year 2022-23.
But Li still expects property prices to continue growing strongly this year.
Juwai IQI co-founder and CEO Daniel Ho said Chinese investors were now waiting to become permanent residents before purchasing property in Australia to avoid costly new taxes.
‘In 2024, don’t expect a price correction. Prices are more likely to remain at their high level or even increase slightly,” Mr Ho said.
“Buyers are willing to continue paying high prices because the shortage of listings and rentals leaves no other option.”
Prime Minister Anthony Albanese’s government also scrapped its “golden visa,” which gave wealthy foreign investors the right to live in the country.
The visa for major investors was cut in an immigration reform on January 22 after the government found it was “performing poorly economically.”
Home Affairs Minister Clare O’Neil said the problematic programme, introduced by former Labor prime minister Julia Gillard in 2012, was part of the “broken” system Labor had inherited.
Peter Li, manager at Sydney-based Plus Agency, told Daily Mail Australia that Chinese buyers were now more likely to buy something they or their children could live in.
Chris Bowen was immigration minister at the time, but is now in charge of the climate and energy portfolios.
The visa required a minimum investment of $5 million in Australia, in exchange for automatic permanent residency.
Thousands of major investor visas have been granted through the program since its inception in 2012, and 85 percent of successful applicants were from China.