The issue of Chinese investment in Australian property is an emotive one, peppered with lack of hard data and the spectre of xenophobia. The ABC’s Four Corners program “Great Wall of Money” this week took a wide look at the issue, profiling just who in China is investing in property here and why, as well as looking at the role of brokers and the regulatory failures of managing foreign real estate investment.
Our research shows the brokering agents and associated industries are often ignored in public discussions about the intersections between global real estate investment and transnational education and migration.
It is a mistake, however, to bring these very diverse motivations together under a united narrative about foreign real estate investment rule breaking, money laundering and corruption.
The super rich
Sophisticated multilingual digital real estate, migration and education sectors are actively targeting three types of investors from countries such as China - foreign students, the new middle class and the super rich investors.
Work by UK researcher Chris Paris shows high net worth investors from China, Russia and other countries have displaced some long standing higher-income populations from their higher-income suburbs.
In particular the impact of super rich overseas buyers of real estate in London is “de-coupling” parts of city from the general dynamics of local housing markets.
Four Corners shows higher-income Sydney suburbs, such as Point Piper, are on the super rich’s real estate radar. But there is a danger in overwriting Paris’ analysis of London onto Australian cities.
Super rich investors are only one investor group and foreign real estate investment is less than 5% of Australia’s residential real estate economy. Early work presented at the Institute of Australian Geographers conference by Ilan Wiesel suggests more empirical data is needed on the enclaving of the super rich in Australian cities.
Investors and brokers
Studies from Sydney, Melbourne, London and Vancouver show different investor groups have very different motivations for investing in foreign real estate, and each group targets a different suite of property types.
Much like our research, Four Corners found Chinese investors are not all “super rich” or simply investing in Australia in pursuit of a financial return. Their motivations for buying property in Australia are complex and blended around lifestyle, status, educational opportunities, and often, their existing family connections to Australia.
They might be looking for a place for their children to live while they are studying, an opportunity for retirement to a good climate, a “holiday home” for leisure, or, for the super-rich, a lifestyle (with water views) that’s simply not possible to attain in China and a subsequent social status. While these buyers may not be citizens, they may be long-term residents or potential future citizens with strong existing connections to our cities.
Property investments often tie into long-term family migration and international education strategies. Chinese property investors are not simply annexing Australian housing as offshore assets – some are building portfolios, but many are buying “homes” rather than simply “properties” – places for them to live and enjoy.
Many globally mobile real estate professionals also have complicated cultural identities and nation-state allegiances. The binary between “Eastern” and “Western” international real estate, migration and educational brokerage has been shown to be a false dichotomy.
More than money laundering
Halfway through the show the Four Corners piece took a strange turn. The investigation shifted from foreign real estate investment onto corruption claims, spy networks and religious persecution in Mainland China.
There is a danger in rolling the diverse investors groups, property types and investor motivations into a discussion about corruption and money laundering. And there is also a xenophobia in associating “dirty money” specifically with Chinese investment practices, especially practices that are common across Chinese and non-Chinese investors.
For example, Australian super-rich individuals also finance their various investment ventures from diverse sources of transnational capital, employ brokers who work to help them exploit loopholes in taxation and investment law, and use intergenerational wealth transfer in business and property investment.
However, the question of who is responsible for managing and enforcing the “Great Wall of Money” remains.
After the 2014 Parliamentary Inquiry into Foreign Investment in Residential Real Estate it was clear the Federal government was planning to make an example out of some foreign investor “rule breakers”.
However, as one of the authors suggested at the time, apart from political point scoring, catching the rule breakers will have a marginal impact on the domestic residential housing market.
This move has simply shifted the public debate from a discussion about invading foreign investors to a discussion about foreign rule breakers.
Certainly, the government needs to better regulate the movement of people and capital through Australian real estate and address the money laundering question. The Parliamentary Inquiry showed the government needs to improve its data collection process to achieve this goal.
But blaming foreign investors wholesale and making the global real estate, migration and other industries responsible for managing and enforcing foreign investment and migration seems untenable.