Misinformation about the Chinese continues today, 70 years after an ‘infamous remark’* by the Australian Immigration Minister in 1947 was taken out of context.
Last week, huge news headlines shouted that offshore Chinese investors are ‘snapping up’ 26% of new properties in NSW, 17% in Vic and 8% in Brisbane.
This is the first wrong. (Find out more at my Aus-China Property Developers, Investors and Financiers lunch)
The stories were based on Credit Suisse’s ‘freedom of information’ request from state government revenue offices (stamp duty) for the financial year 2016/2017.
But foreign investors in off-the-plan (OTP) NSW apartments could delay paying their stamp duty by 12 months. (This benefit ended 21 June 2016 in the NSW Budget).
So investors who bought from July 2015 to 21 June 2016 would be paying their stamp duty in the 2016/2017 year (to take advantage of the 12-month delay before their eventual settlement 2-3 years down the track).
PLUS the investors who bought in 2016/2017 now don’t have that 12-month delay …so their stamp duty would be also paid* in 2016/2017.
This means the stamp duty collected from foreign investors in 2016/2017 was based on two years collections….the ‘boom’ years of 2015/2016 and the 2016/2017 year.
So those Credit Suisse percentages are incorrect, and are more than double what is really happening. The reality is that offshore buying has slowed significantly, particularly in the past nine months.
Wrong number 2
Last month, news headlines screamed that 25% of offshore Chinese investors left their apartments vacant and another 25% used their apartments on a temporary basis (eg holiday house) so it was mostly vacant, according to a UBS survey.
It took a Fairfax reporter Jennifer Duke to point out that ‘data’ relating to Australia was based on survey of just 50 Chinese investors with property in Sydney and Melbourne, and the UBS report itself noted that the numbers in various cities were ‘not statistically significant’. A UBS executive told Duke that the “sample size is too small to draw conclusions down to a specific country level”. (there’s been nearly 100,000 FIRB property approvals in the seven years to June 2016 as a comparison, so 50 is really insignificant as a survey)
Normally, I like misinformed news. It gives an investor an edge when other punters out there rely on the wrong information (for every buyer there needs to be a seller with a differing opinion). But in this case, when social considerations are more important than economics (we are talking about homes people live in, affordability, community harmony and political relations between Australia and China), misinformation takes on a much bigger and more sensitive political and social hue.
There are 2 other high profile but misinformed news headlines in recent months relating to Chinese investors. Details to be discussed in my Aus-China Property Developers, Investors and Financiers lunch 20 Nov Sydney. $180+ earlybird rates. Our sponsors include Lefand Group and Doltone House. The event is already 1/3 full.
Next week, I will report on the outlook for the next 5 years for China under President Xi. Xi whiz, it will be an interesting next half-decade!
*For explanations see below (in blue)
RBA Financial Stability Review
RBA’s excellent half-yearly financial stability review was issued last week.
The 62 page report is a great read but we’ve summarised seven key points and charts in my previous newsletter – The head of the RBA department responsible for this report is my keynote speaker at my property lunch on 20 Nov. Other keynote speakers include a property veteran who has seen the ups and downs of the property cycle since 1972, and a Chinese-Australian developer, hotelier and financier.
I hope to see you on the 20th November
*‘Two Wongs don’t make a White’ was a remark made in December 1947 by the then Minister for Immigration Arthur Calwell who supported the ‘White Australia’ post WW2 immigration policy
The remark was a play on the often used saying ‘two wrongs don’t make a right’…. i.e that correcting an error (usually moral error) by using another error is not justified.
However, Calwell’s remark (which was widely quoted for decades later as a racial slight) was a jocular reference to an opposition politician whose surname was “White’ rather than exclusively a racial remark. See details here (section at end; Calwell and racism)
To be nit-picky, buyers have to pay stamp duty within 3 months of exchange of contract AND there was a 12-month delay permitted on top of the 3 months. So the 2016/2017 stamp duty collected would also have included OTP properties bought in April, May and June 2015.
However, OTP properties bought in April, May, June 2017 (when deals slowed down recently) would not yet have paid stamp duty so would not be in the 2016/2017 numbers.