Chinese wealth flowing into Australia

[jackbak]

It is good for Australia.

I understand it's good for certain interested parties (constructions copanies, agents, a few property investors) but out of interest why do you say it's good for Australia?

 

[XMW]

It's not rubbish, it's established fact that a lot of corrupt Chinese money ends up in foreign real estate. Some countries have done something about it, Australia not so much yet hence is still a favoured destination for investment.
http://qz.com/143017/beijing-goes-hunting-for-overseas-real-estate-by-corrupt-officials/

You are making a big assumption here, based on a few high profile case in China and reach you conclusion that "a lot" Chinese investment here are corrupt money.

If I use same logic, I can also say "a lot" of Australia money invested in property are dirty money, based on recent corruption case eg Obeid. I guess this will insult every hard working investors here on this forum.

 

[sash]

The Chinese are predominately buying new units off the plan as this is what is being promoted.

This as you said translates into work for constructoin companies, agents, furnshing companies etc. Just in NSW the level of construction both a a commercial and residential level is unprecedented.

People are not good at making these connections......

I understand it's good for certain interested parties (constructions copanies, agents, a few property investors) but out of interest why do you say it's good for Australia?

 

[Melbournian]

i reckon the project which is no. 1 hype at the moment for off the plan is 545 station st, box hill. i would expect it to be sold out in couple of hours if released if it is was the same as the glen waverley project.

 

[TomW]

I don't want my country to become a money laundering destination like Switzerland used to be.

Too late for that. London washes dirty Russian money Sydney and Melbourne wash dirty Chinese money.

 

[chilliblue]

Points made above are correct in that the Asian buyers are predominately purchasing residential off the plans properties (give or take a few mines and rural properties) and the Americans/Canadians are the commercial/retail purchasers.

Yesterday on ABC radio people were ranting on how wealthy executive couples are now leasing all the better quality suburban and leaving the average family struggling to find a accommodation.

One caller said that these "types" were pushing up rentals in the inner west, northern and eastern suburbs and that real estate agents have a preference for them.

 

[truong]

This is just rubbish talking.

There is a real estate bubble in China - Any investor in Beijing / Shanghai sells one of their investment property there can easily buy $700k house here easily by cash.

My point here is due to recent exponential real estate growth in China, average investor can afford to buy real estate overseas to spread their risk profile. Brother in law just sold his 2 bed unit in Beijing for AU$ 1 mil and he is thinking of buy an off plan unit here.

Not saying that your BIL is doing it but this is exactly how money laundering works. Money obtained through the sale of an asset is no proof that it wasn't dirty in the first place.

In another thread I've talked about how deep-seated corruption is in China so I don't want to repeat myself. There's a limit to what I can say so I'll just mention that I know for a fact how these things work. Not necessarily the big fish. These are "ordinary" Chinese officials/members of the CPC/well connected and well protected individuals on $10K salaries buying multiple properties in Oz. Not all these properties were OTP or went through FIRB.

There's very little Australian authorities can do if the Chinese themselves are letting it happen. For people to demand proof where even in China all the proofs are being edited out is unrealistic or naive. The veil will never be lifted unless there's a regime change, and even then too much water would have flown under the bridge. So it doesn't surprise me that you as a honest citizen believe that these things can't happen. And sorry again if I have appeared insensitive about your BIL.

By the way I'm all for foreign investments, but this is so wrong...

 

[XMW]

Not saying that your BIL is doing it but this is exactly how money laundering works. Money obtained through the sale of an asset is no proof that it wasn't dirty in the first place.

In another thread I've talked about how deep-seated corruption is in China so I don't want to repeat myself. There's a limit to what I can say so I'll just mention that I know for a fact how these things work. Not necessarily the big fish. These are "ordinary" Chinese officials/members of the CPC/well connected and well protected individuals on $10K salaries buying multiple properties in Oz. Not all these properties were OTP or went through FIRB.

There's very little Australian authorities can do if the Chinese themselves are letting it happen. For people to demand proof where even in China all the proofs are being edited out is unrealistic or naive. The veil will never be lifted unless there's a regime change, and even then too much water would have flown under the bridge. So it doesn't surprise me that you as a honest citizen believe that these things can't happen. And sorry again if I have appeared insensitive about your BIL.

By the way I'm all for foreign investments, but this is so wrong...

What is your point here? Seems you are tainting all Chinese investment with the same brush and your view is quite biased.

 

[Aaron_C]

What is your point here? Seems you are tainting all Chinese investment with the same brush and your view is quite biased.

It's just a statement of fact. Corruption is rife in that country and it permeates its way through to our shores as well. For example, customs officers in China get paid a nominal salary but end up owning LV handbags and owning mansions in Melbourne due to the kickbacks they get for moving people's stock through the ports. Everyone knows this.

 

[XMW]

It's just a statement of fact. Corruption is rife in that country and it permeates its way through to our shores as well. For example, customs officers in China get paid a nominal salary but end up owning LV handbags and owning mansions in Melbourne due to the kickbacks they get for moving people's stock through the ports. Everyone knows this.

Look this argument started with a statement saying " a significant" amount investment from Chinese investor are from corrupt money. I'm sure you are also of the same view however there is no number to back it up.

There are a few articles lately on Chinese investment here and its impact on local property market, and I didn't see "significant" corrupt money mentioned.

Below two article summarised quite well behind this significant investment from China:

- Education for kids
- Investment
- Life style

and this is supported by a staggering 64 million middle class who can afford to buy here, due to economic growth in the last 30 years and recent property boom.

http://www.news.com.au/finance/real...-drive-up-prices/story-fncq3era-1226848427262

http://www.smh.com.au/comment/cashe...ut-of-the-property-market-20140309-34f9k.html

 

[truong]

What is your point here? Seems you are tainting all Chinese investment with the same brush and your view is quite biased.

I can't taint it more than it is.

The problem, XMW, is that there is no transparency in China so nobody can ascertain what is above board and what is not. I'd love to say that the tainted money is only a small part of it but nobody can be sure about that. So in the meantime you go by your own anecdotes and I go by mine.

According to Transparency International, China is in the same league corruption-wise as Swaziland, Burkina Faso, El Salvador, Jamaica, Liberia, Mongolia, Zambia, Malawi, Sri Lanka etc... but the tragedy is that it's by far the most populous country in the world and soon-to-be the biggest economy. I wish I could say that this problem doesn't concern me.

 

[Francesco]

China's rank on the Corruption Perceptions Index 2013 according to Transparency International against some of Australia's major trading partners:

New Zealand 91
Singapore 86
Australia 81
Canada 81
UK 76
Japan 74
US 73
South Korea 55
Malaysia 50
China 40
India 36
Indonesia 32
Vietnam 31
Russia 28


China's rank performance is not dire as a developing country and ranked slightly lower than Malaysia and South Korea where infrastructure and administrative governance benefited from Western supports (US and UK). China's performance is almost commendable seeing that it is ranked better than India and Indonesia, which have development in administrative governance from Western powers (UK and Netherlands). For its size, it has fared better than other countries with past communist administration such as Russia and Vietnam. Admittedly, China has years to catch up to the level of transparency as South Korea.

 

[BayView]

I can't taint it more than it is.

The problem, XMW, is that there is no transparency in China so nobody can ascertain what is above board and what is not. I'd love to say that the tainted money is only a small part of it but nobody can be sure about that. So in the meantime you go by your own anecdotes and I go by mine.

According to Transparency International, China is in the same league corruption-wise as Swaziland, Burkina Faso, El Salvador, Jamaica, Liberia, Mongolia, Zambia, Malawi, Sri Lanka etc... but the tragedy is that it's by far the most populous country in the world and soon-to-be the biggest economy. I wish I could say that this problem doesn't concern me.

History tells us that Countries where blokes in charge are running around in army style clothes 24/7 when there are no wars, followed around by other blokes in black suits with matching hairdo's and eyeglasses, and look scared as if they might be executed at any moment on a whim (and often are; as are many of the citizens for lame cultural, religious and/or political reasons) are bound to be corrupt as hell.

Add to that the fact that there are 1.3 billion and with a steady rise in that number, and you have a large problem for the rest of the world.

 

[truong]

http://qz.com/143017/beijing-goes-hunting-for-overseas-real-estate-by-corrupt-officials/

Read the long article and follow the many links in there. Some of the info comes from Transparency International. Excerpts here:

China's corrupt officials and crooked businessmen have smuggled billions of dollars overseas, much of which has ended up in real estate in the United States, Canada, Australia and the United Kingdom - particularly in high-end neighborhoods in London, New York, Los Angeles, Sydney and Toronto. Now the Chinese government is embarking on a worldwide hunt to seize the properties with help from foreign governments, according to asset recovery and anti-corruption specialists.

President Xi Jinping's corruption crackdown has resulted in a surge of convictions - in the first quarter of this year alone, China's prosecutors handled nearly 3,700 corruption cases involving $87.5 million. And the campaign has claimed some prominent scalps, many of which involved prominent foreign property holdings. When the Jinan People's Court sentenced former Politburo member Bo Xilai to life in prison in September, it also announced plans to seize a villa owned by his wife on the French Riviera. Separately, a home in Walnut, California, believed to be owned by ex-railway minister Zhang Shuguang, is also a likely target for Beijing's asset hunt.

Those high-profile cases may be just the beginning.

Estimating exactly how much corruption-tinged cash has fled China in recent years is difficult, but Ran Liao, senior program coordinator for Transparency International, a non-profit that works with governments and the private sector to curb corruption, said estimates run as high as 500 billion yuan ($82 billion) taken overseas in recent years. Other mind-boggling estimates abound:

- A leaked report from China's central bank estimated that from the early 1990s to 2008, some 18,000 officials and employees of state-owned enterprises pilfered a total of 800 billion yuan ($123 billion) from state coffers, with the culprits most likely to flee to the US, Canada, Australia and the Netherlands.
- China's anti-corruption unit, the Central Commission for Discipline Inspection, predicted in another leaked report (link in Chinese) that $1 trillion may have fled China in 2012.
- "Grey income" - household revenue above what's declared officially - reached an estimated $1 trillion in 2011, according to the China Society of Economic Reform.

For a corrupt official with money to invest, putting funds directly into an overseas bank or stock market can be risky, because financial institutions are required by global anti-money laundering agreements to report suspicious funds. But real estate agents in most countries have no such requirements. So when Chinese buyers land with suitcases full of cash, as they have in recent months, real estate deals can get done quickly.

Chinese buyers spent $30 billion on overseas real estate in 2012, estimates Juwai.com, a property website. Of that, $9.1 billion went to the United States and much of it specifically to California. And almost 70% of the purchases made by Chinese buyers in the United States were made entirely in cash, according to the most recent report from the National Association of Realtors.

Australian regulators approved $4 billion in real estate purchases by Chinese investors in the 2011/12 fiscal year (pdf, pg. 30), the most recent figures available. Canada keeps no hard data about foreign investors in real estate, but Chinese buyers in one year outnumbered local buyers in Vancouver by a three to one margin. They also bought 27% of new homes sold in London last year.

The soon-to-retire Chinese bigwig who has stashed money and relatives abroad in preparation for his escape is such a common character in China that it has its own phrase: luo guan, or "naked official."

Some of them have laid the groundwork for years; one common ploy is to send a son or daughter overseas to a private university as a way to legitimize sending funds out of China. For example, the leaked Chinese central bank report on corruption showed that former ministry of finance official Xu Fangming deposited roughly 1 million yuan ($164,000) into the bank account of a son studying abroad. Perhaps not coincidentally, the number of Chinese students studying abroad has jumped in recent years. In the United States, it more than doubled to 194,000 in the 2011/2012 school year from five years ago.

Another popular strategy for gaining a foothold overseas is securing a foreign passport through "immigrant investor" programs.

The ultimate goal in transferring money out of China, said Transparency International's Liao, is that either the official or his offspring will have a happy life after they leave China. The new crackdown on overseas assets is designed to stop this process.

"The government wants to make them hopeless," Liao said. The message is "You can't just steal money from China and then enjoy life in Canada."

A tough road to recovery

Whether the Beijing's hunt for overseas properties will be a success, and perhaps even impact home prices in Los Angeles or London, remains to be seen.

Seizing and recovering assets in a foreign country can be a tough slog for any government, experts in the field say. While China and most Western nations are signatories to the United Nations Convention Against Corruption, in which countries pledge to help each other recover the stolen funds, the process is lengthy, arduous, and fraught with diplomatic and legal complications.

One point that needs highlighting is that many of these corrupt people have already gained residency/citizenship in the said countries. Their RE purchases will not appear on any stats about "foreign money". Not all transactions by our "local Chinese" are above board. And I'm saying this with great humility as most of my super-extended family can be called "local Chinese".

Also, the "bigwigs" mentioned in the article may well not be big at all. As I said earlier they can be on salaries of just a few thousand dollars/year.

And a final comment: I don't need this type of articles as I already know much of it for a fact, but some on this forum do need to read them from time to time, hence this post.

 

[truong]

Interesting development...
http://www.businessspectator.com.au...e-asian-money-rushing-australias-inner-cities

The tidal wave of Asian money rushing into Australia's inner cities

The inner city residential property development markets of Melbourne and Sydney are experiencing a sudden and spectacular boost. For many Asian and Chinese investors, inner-city property investment in Australia is replacing gold as a hedge against possible difficult times at home.

While this has been happening for years, few were prepared for the latest set of events. It started slowly in the early weeks of January and February this year: Chinese and other Asian investors began buying apartment development sites that had secured permission to build, and are funding those developments using Chinese rather than Australian banks. In turn, most of the apartments will be sold to Chinese and other Asian investors.

In the following months, the size of the Chinese investment rose substantially and the price of inner-city land in Melbourne with permits to build has quickly doubled. A similar trend is taking place in Sydney.

The 2014 escalation has been so rapid that many Australian developers are now saying that there is no point in undertaking developments because you can make your money gaining permits and selling the land to Chinese and other Asian investors.

Accordingly, this will change the nature of new property development in our two largest cities, and will spread to other centres across the country.

Under the old practices, Australian banks made life tough for developers. To get bank funding for an apartment development, developers had to pre-sell a substantial portion of the proposed apartments "off the plan". In addition, to qualify for an Australian bank loan only about 15 per cent of a project could be pre-sold to Asian investors because the banks argued the pre-sales to these investors were unenforceable contracts.

The combination of the difficulties in gaining permission to build and the bank financing rules restricted the supply of apartments. We are now seeing a rapid increase in apartment development because Australian banks have been by-passed.

The Chinese and other Asian banks lend at low interest rates and do not have Australian bank lending restrictions on "off the plan" sales to Asian investors.

Many believe there is increased nervousness in China about lower future rates of growth and a possible social backlash. Some even suggest China's aggressive stance on disputed territories is really a smokescreen for economic difficulties at home. The jailing of Bo Xilai, who was once considered a likely candidate for promotion to the elite Politburo Standing Committee, made a lot of Chinese nervous because like Bo, they have made large sums out of corruption.

Similarly in London we have recently seen vast amounts of Russian money plunged into property in the city as a result of the turmoil in Ukraine. In previous generations that sort of money used gold as a safe haven. Now it's inner-city property. The official statistics in Australia show very modest increases in overseas investment in Australian property and that won't change because these giant offshore-funded and pre-sold developments usually miss the statistician's radar.

 

[cu@thetop]

Had a client settle a sale to cashed up Chinese this week for a development property at Cannon Hill. They had also purchased neighbouring lots with a view to mega unit development. My client got good money for the block- 2 earlier sales to local yokel developers at lower prices had fallen over last year.

 

[MightyWill]

Whether the money comes from corruption or not, it's still money entering this economy making this economy what it currently is. I take it that our current economy is pretty good compared to the rest of the world.

Where ever you go, there will be corruption whether you know about it or not. How about all the bikie's stuff going around Australia. How much of that corruption is behind the scenes of our everyday lives.

The coffee or beer you buy from the local pub is probably corrupt. You are just funding it even more. How about you buying something off EBay without you even knowing where it came from; you don't care, you just buy it cause it's a bargain.

 

[LoneWolf]

Whether the money comes from corruption or not, it?s still money entering this economy making this economy what it currently is. I take it that our current economy is pretty good compared to the rest of the world.

Where ever you go, there will be corruption whether you know about it or not. How about all the bikie?s stuff going round Australia. How much of that corruption is behind the scenes of our everyday lives. The coffee or beer you buy from the local pub is probably corrupt. You are just funding it even more. How about you buying something off EBay without you even knowing where it came from; you don?t care, you just buy it cause it?s a bargain.

I totally agree with you Will.

Corruption is a way of life, and its not bounded by cultural, time or people differences. it's basically everywhere, most just don't see it and acknowledge its existence

Now, on the other hand, those who speak as if they are over and above this, its either you have never had a chance, or, too ignorant to accept this concept

Put it frankly, it's just business

 

[saiman]

Had a client settle a sale to cashed up Chinese this week for a development property at Cannon Hill. They had also purchased neighbouring lots with a view to mega unit development. My client got good money for the block- 2 earlier sales to local yokel developers at lower prices had fallen over last year.

similar story here


http://www.news.com.au/finance/real-estate/melbourne-homeowners-team-up-to-take-advantage-of-law-changes-and-net-576m-windfall/story-fndbawks-1226958657102

 

[Melbournian]

similar story here


http://www.news.com.au/finance/real-estate/melbourne-homeowners-team-up-to-take-advantage-of-law-changes-and-net-576m-windfall/story-fndbawks-1226958657102

that's a really smart move collectively doing something like that.