20 July 2019
Property tycoon Xu Jiayin is expected to suffer a loss from selling Villa Del Mare, a 16,000 square foot luxury property in Sydney he bought in 2014. Photo:
Property tycoon Xu Jiayin is expected to suffer a loss from selling Villa Del Mare, a 16,000 square foot luxury property in Sydney he bought in 2014. Photo:

Canada, Australia clamp down on foreign homebuyers

Skyrocketing home prices are the bane of many global cities. Canada and Australia have launched several measures to address the problem, and Hong Kong can probably get some inspiration from them.

Residential prices in Vancouver and Sydney rose 36.4 and 10.2 percent, respectively, in the second quarter of last year from a year earlier, according to Knight Frank.

Both cities have large numbers of Chinese immigrants, and local properties are very popular with deep-pocketed Chinese buyers.

But local residents can hardly afford the surging home prices. They have been pressuring local governments to act on the problem.

Since the start of the year Vancouver has unveiled a set of measures to discourage foreign property buyers.

The local government has imposed a 1 percent tax on homes that are not principal residences and those unoccupied for more than six months in a year.

Prior to this, a 15 percent property transfer tax has been imposed on deals involving foreign buyers.

These measures are believed to mainly target Chinese buyers, who usually buy luxury properties in the city as holiday homes and leave them vacant most of the time.

The 1 percent empty home tax has cooled the city’s red-hot housing market. Residential property transactions slumped 39.5 percent in January from the year before, while the average home price dropped 6.6 percent.

Restrictions in Australia are even tougher.

Under the country’s foreign investment rules, non-citizens have been restricted to buying new or off-the-plan properties since 2014.

Temporary resident visa holders, including foreign students, investment immigrants and visa workers, are able to buy one second-hand home for their own use, but they are asked to sell the property when they leave the country.

The rule has been poorly enforced, however, and many foreign investors have been able to acquire existing homes illegally.

But the government is clamping down on these illegal deals. Buyers who violate the rule will be asked to sell the property within 90 days.

So far there have been 61 such cases, and 40 percent involve Chinese owners.

The most expensive property the government has put on the market is a 16,000-square-foot mansion, which was acquired by Xu Jiayin, chairman of Chinese real estate giant Evergrande Group, for AU$39 million (US$29.8 million) in October 2014.

The mansion, located in the well-heeled neighborhood of Point Piper in eastern Sydney, was bought by Golden Fast Foods, said to be a shell company created for Xu to bypass the regulation.

Given the limited time to dispose of the property, Xu may have to sell it at a loss.

Australia has sent a strong signal that it is serious about its crackdown on wrongdoings by foreign investors in the home market.

Measures taken by Vancouver and Australia have proved to be quite effective in stabilizing home prices.

If Hong Kong takes the same approach, it has to balance the expected gains with potential adverse impact on economic growth and foreign investment.

This article appeared in the Hong Kong Economic Journal on Feb. 10

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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