Thursday, May 15, 2014

Budget week...I like a simple life.

Listening to the amazing spin, rhetoric and character assassinations in the media this week, I must say, I found it a serious turn off. If only life could be made more simple and we could unwind all the twists and turns of promises made by our 'leaders'. The term 'heavy lifting' in the context of taxation was repeated over and over, but are we keeping our eye on the ball as a nation while all this politicking is going on?

I was in China two weeks ago on a real estate study tour and couldn't help but be overwhelmed with what is going on over there. Freedom of speech within the communist regime is not a given, with filtered information, limited social media and only 'approved' websites available to access. Probably not something many Australians would enjoy, not for long anyway. 

Speaking with our Australian peers who were also on the trip and from other states (in particular Sydney and Melbourne), the level of activity of Chinese buyers in Australia's most prestige residential property markets is staggering. According to an agent from Melbourne, one in two auction buyers in prestige suburbs, such as Toorak and Brighton, are Chinese. In Sydney, prices are being driven by the incredible influx of Chinese money and their thirst for quality property. 

The contrast between the two country's government practices and media behaviour is interesting… as is the contrast between Australian wealth and emerging Chinese wealth. 

The statistics we were given at the conference showed $5.9 billion invested in Australian property amongst our Chinese population of one million. One big attraction to the Chinese is that Australian property is sold on a fee simple freehold basis, whereby our Australian system of property ownership is ownership forever. In China, you buy a 70 year right to a residential property... that's all! It's no wonder we're seeing so much interest… it must be an appealing concept to buy outright ownership of Australian property.

Casual conversations with locals in Shanghai were fascinating. Chatting with those in the know, it seems that an approval to purchase in Australia isn't of any great concern as 'there are always creative ways around any potential issue'...? Personally, I have no idea whether there is or there isn't. 

So... given we are obviously so short of money over here (listening to all the carry on over the budget), and given there seems to be endless rivers of gold from those looking to invest from outside of the country, wouldn't it make sense to tap into those buying up our assets, rather than just having us share the heavy lifting? After all, when it comes to buying Australian property, it's not just a 70 year deal… it's forever.

Why not double or even triple the stamp duty on all foreign purchases… it would slow the inflationary effect for the housing market and it would swell the government coffers for the moment… it would also make selling our Australian assets more of a commercial negotiation. Seriously, it wouldn't be a big deal for most of these buyers and it would give Australians a hand with the heavy lifting and help sort our finances. Alternatively, could we be more savvy and match the 70 year ownership rules… mirror the purchase conditions for foreign buyers? This would provide long term sustainability of our assets and retain our capital. 

If we are to sell off our best properties, for life, why not make it worthwhile for all Australians?
You see, I am already anticipating emails and calls flooding in complaining about this comment with a thousand reasons why it shouldn't happen... perhaps it's just too simple. I'm all for free markets, I just don't want everyone thinking we are a country of wood ducks.

The Adelaide Market... The market has been great, unbelievable sales… so things can't be bad out there. Don't get caught up in all the doom and gloom, clearly people with a lot more money than most of us are excited about what we have to offer in Australia. The next cycle has begun, yeah!

Anthony Toop

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