And this from an expert as to the effect on prices.
Chinese nationals 'illegally' buying luxury Australian real estate are forcing prices up by 30 per cent, leading agent claims
David Morrell says foreigners who do not meet residency requirements are illegally buying premium property in Australia's most expensive suburbs
He claims they are being aided by local real estate agents and lawyers
Chinese investors buying up property in Toorak, Hawthorn and Mosman
By SARAH MICHAEL FOR DAILY MAIL AUSTRALIA
PUBLISHED: 12:24 EST, 1 September 2014
David Morrell, director of buyers' agency Morrell & Koren
Foreign investors are illegally buying premium property in Australia's most expensive suburbs and are pricing locals out of the market, a leading buyers' agent has claimed.
David Morrell said foreigners who did not meet residency requirements were being aided by local real estate agents and lawyers to buy large amounts of property in well-heeled areas including Toorak and Hawthorn in Melbourne's inner-east and Mosman on Sydney's North Shore.
He also claimed the Financial Investment Review Board (FIRB) was doing nothing to stop them, and that real estate agents and lawyers were turning a blind eye because they were profiting from the sales.
Mr Morrell, director of buyers' agency Morrell & Koren, said the investors who were predominantly from mainland China were willing to pay well above market value just to secure property in wealthy suburbs.
In his submission to a parliamentary inquiry into foreign investment in residential real estate, Mr Morrell said he had witnessed a recent Toorak auction where the reserve was exceeded by 30 percent.
'There were three Chinese nationals competing, neither spoke English or understood the process and literally just kept their hands in the air,' he said.
Mr Morrell told Daily Mail Australia: 'It was great for the vendor they got a big free kick but it was surreal. It was like the auctioneer taking money off the tree it was just silly.
Mr Morrell claims foreign investors are illegally buying premium property in Australia's most expensive suburbs, including Sydney's Mosman (pictured), and are pricing locals out of the market.
Mr Morrell claims foreign investors are illegally buying premium property in Australia's most expensive suburbs, including Sydney's Mosman (pictured), and are pricing locals out of the market
Sydney property market reaching tipping point (archive)
'The frustration I'm hearing from my clients is we're not competing on equal terms.
'If they start getting free kicks like that all the time then the market really gets out of control.'
Mr Morrell said the issue was affecting two segments of the property market in particular – high-end properties worth more than $10 million and inner-city properties worth between $1.5 million and $3 million.
'It's a domino effect because if someone down street sees a house sell for $12 million when it's only worth $9 million then someone else with a $9 million house suddenly thinks it's worth $12 million,' he said.
'There are also first home buyers trying to get in the inner city and all these apartments are being sold to people offshore.
'We're going to be looking at a generation of renters.'
Mr Morrell said foreigners who did not meet residency requirements were being aided by local real estate agents and lawyers to buy large amounts of property in well-heeled areas including Toorak and Hawthorn in Melbourne's inner-east and Mosman on Sydney's North Shore.
Foreigners must have residency in order to buy property in Australia, but Mr Morrell said the FIRB relies on estate agents to report any wrongdoing, and Mr Morrell claimed the agents were turning a blind eye because of the higher commissions they were receiving.
'The big problem is the vendors and agents aren't going to stop it because they want more money,' he said.
'Lawyers are not going to dob their own clients to the FIRB.'
He said current rules were sufficient but they needed to be enforced properly, and labelled the FIRB a 'toothless tiger'.
'They haven't got the resources to investigate and even if they do it's a slap over the face with a wet lettuce,' he said.
Mr Morrell said proposals to impose extra stamp duty on foreign buyers would do little to discourage the investors.
'Some people will just see that as the cost of doing business in Australia,' he said.
Nicholas Proud, executive director of the Residential Development Council, said he opposed charging foreign investors with extra stamp duty.
'The first thing that should change is rules should be enforced,' Mr Proud said.
'We can see foreign investment has been positive but where there are concerns the rules aren't being enforced or activity is having an effect on the market we need to understand that.
'Most people would say the FIRB needs to collect additional detail, I think everyone is in agreement that there needs to be greater amount of fact on the table.'
Mr Proud added that the inquiry into foreign investment was a good thing.
'This shines a light on the fact that we don't know enough about the transactional detail of foreign buyers,' he said.
'We need to rectify that.'
Daily Mail Australia has contacted the FIRB for comment. #WakeUpFIRB
Members of the public can report information on possible breaches of Australia’s foreign investment policy on 1800 050 377 or email to [email protected]
