Chinese investors have been pumping up property prices all over the world.
In Hong Kong, the influx of mainland capital has forced the government to double the stamp duty on most residential properties to cool the market.
Australia is planning to do something similar, with the government recently announcing measures on foreign purchases of houses and apartments.
Australia is the second most favored destination for Chinese property investors behind the United States but ahead of Canada and Britain, according to Juwai.com, the largest real estate portal for Chinese buyers looking for overseas properties.
In fact, the US has frozen its investment immigration visa program after Chinese applicants overwhelmed the quota.
Chinese money has been largely blamed for a surge in Australia’s house prices in recent years. Sydney house prices, for instance, rose 14 percent in October from a year earlier, according to the RP Data CoreLogic Home Value Index.
Meanwhile, the median asking price for detached houses topped A$1 million (US$864,300) this month for the first time ever as sellers raised expectations in a booming market.
Australia residents are complaining about the influx of foreign capital, saying it’s squeezing them out of the property market, making the cost too high for them.
According to the Foreign Investment Review Board, Australia’s real estate sector has received A$6 billion of capital last year, up 41 percent from a year earlier. The trend doesn’t seem to be slowing.
By law, foreigners can legally purchase property in Australia but are prohibited from buying existing homes.
A temporary resident who has a visa valid for 12 months or more can acquire a single property to live in but must sell it within three months after leaving the country.
These rules are designed to encourage investors to buy first-hand or off-the-plan properties to release housing resources for residents and renters. However, these laws have never been seriously enforced.
That’s why the government is planning to tighten the regulations, including stiffer penalties for people who breached the current restrictions. For example, any capital gain from the sale of an illegally held property will be seized by the government.
Also, the government is considering changes to the immigration law.
But even with increased efforts to plug the loopholes, housing prices will continue to be supported by Chinese big spenders looking for a place to park their money.
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